Indonesia Energy (In)security Regional Workshop on Energy and Non-Traditional Security RSIS’s Center for Non Tradition Security Studies Singapore, 28 – 29 August 2008 Fabby Tumiwa Institute for Essential Services Reform

Role of Energy Resources National Development National & Local Revenue Energy and Fuels for Economic Activities Raw Material for Industrial Processes Stimulate Multiplier Effect Energy Resources

Fuel Shortages…… Energy provision has worsened since the economic crisis in 1997. Fuel shortage has occurred since 2000 and widespread to all provinces. In the last 3 years, fuel shortages get more frequent and often, including LPG. Demand for fuel increased rapidly, so does the energy subsidy Problem with fuel supply management, fuel distribution and fuel subsidy Emerging of “Energy Insecurity” throughout the country

Fuel Shortage….. People are in long line to buy kerosene in Surabaya (East Java), Solo (Central Java) and Pontianal (West Kalimantan). Picture for Surabaya and Pontianak was taken on August 24, 2008, and for picture for Solo took in 2006.

People in lining for LPG in Bangka island (Sumatra) (taken 18 June 2008). Thousands of motor bike are in lining in the pump in Banjarmasin (South Kalimantan), in lining to fill gasoline (16 June 2008)

Lights Out…. Power shortages have occurred more frequent and widespread to all region since 1997 economic crisis. Increasing number of critical system (shortage of supply) areas Power generation shortages: PLN is unable to make sufficient investment in generation and T&D infrastructures to cope the growing demand. Fuel disruption and fuel shortages: Supply of primary energy to PLN’s generators Technical issues: power plant’s derating capacity, maintenance & service problem, etc Non-technical: seasonal, natural calamity, etc

Policemen are installing generator set for traffic light in Jogjakarta to anticipate rolling blackout (taken in 24 July 2008) A primary school student in Banjarmasin (South Kalimantan) is studying under kerosene lamp. PLN had rolling blackout in Banjarmasin (taken in 12 Feb 2008)

Measuring Energy Security (1) APERC’s Energy Security Indicators: Diversification of energy supply sources; Net energy import dependency; Non-carbon based fuel portfolio; Net oil import dependency and Middle East oil import dependency. Source: APERC, 2007

Measuring Energy Security (2) Derivative of issues: dependency on Fossil Fuel (Oil and Natural Gas) deteriorating energy infrastructure policy & institutional coordination to enhance energy security in domestic level Climate change control: GHGs mitigation

Primary energy dominates by fossil fuel 1970 Oil : 88% Natural Gas: 6% Coal: 1% Hydro: 5% Geothermal: 0% 2006 Oil : 47% Natural Gas: 22% Coal: 23% Hydro : 2% Geothermal: 5% Between 1970 – 2006, primary energy grow by 8% in average Oil is no longer dominate primary energy supply but it share still consider high and likely to continue in the next few decade Both natural gas and coal shares have increased drastically in last two decades Non-fossil energy grow very modest Source: DGEEU, 2005, MEMR, 2007

Huge potential of renewables but…. Energy Sources Potential Resources Installed Capacity Hydro Power 75,670 MW 4,200 MW Micro and Mini Hydro 450 MW 210 MW Geothermal 27,150 MW 1,042 MW Biomass 49,810 MW 445 MW Solar Power 4.8 kWh/m2/day 12 MW Wind Power 9,280 MW 3 MW Traditional biomasss placed second in the final energy consumption. Modern biomass for fuel has not yet well developed. Geothermal potential can be reached up to 100,000 MW in addition to current potential resources, if medium and low temperature geothermal are counted. Source: MEMR 2007

Conventional energy resources are limited Potential Proven Reserve (R) Production (P) R/P Ratio (years) Crude oil 56.6 billion barrels 8.4 billion barrels 348 million barrel 24 Natural gas 334.5 TSCF 165 TSCF 2.79 TSCF 59 Coal 90.5 billion ton 18.7 billion ton 215 million ton 86 Coalbed Methane 453 TSCF - Source: MEMR (2008)

Becoming net oil importer Source: EIA (2006)

Leading in natural gas export Source: EIA (2004)

The world's no. 1 coal exporters Source: Coal Business Association (2008)

Energy exporter and importer Export of Primary Energy Export of Final Energy Source: MEMR 2007

Import of Final Energy Export of Final Energy Source: MEMR 2007

Challenge to Energy Security (1) Oil and Natural Gas dependent High dependency to oil, likely continue for the next two decade. Domestic oil production can not supply domestic demand. One-third of oil demand is supplied by import from Africa, Middle East and Australia, both crude and refine oil. Natural gas for petrochemical industry are imported from middle east (Qatar).

Challenge to Energy Security (2) Insufficient and Deteriorating of energy infrastructure Oil infrastructure Lack of refinery capacity: aging refinery capacities, no additional plant since mid 90s, Lack oil storage and distribution networks More than 40 percents import oil to supply domestic oil demand. Unreliable distribution systems and expensive distribution cost.

Challenge to Energy Security (3) Cont Natural Gas infrastructure Poor domestic gas infrastructure in Java Gas shortages for electricity and industry Coal infrastructure Insufficient coal terminal Deficiencies of coal transport system Electric power generation and T&D network Shortages in power generation Deteriorating condition of Java-Bali interconnection Bottleneck of transmission network Saturated distribution network (in Java)

Challenge to Energy Security (4) Policy framework and institutional coordination Decentralization makes policy coordination in local-national level is more challenging. Similar to policy coordination among ministries and agencies in higher level. Local government poor understanding on energy security concern. Policy and actions based on high resources exploitation to raise more revenue for local budget requirement. The new law on Energy needs strong implementing regulation to ensure energy security at local and national level. Future energy policy will be determined by National Energy Council

Challenge to Energy Security (5) Climate change control: GHGs mitigation External pressure to energy trading policy and priorities Voluntary commitment along with international negotiation Opportunity from carbon market

Some implication Dependent to foreign oil supply, vulnerable to oil market volatility, and price fluctuation Increasing cost of supply and subsidy, adding to fiscal burden. Encourage smuggling and illegal deposit. Creating vicious cycle on subsidy control that lead to the scarcity of fuel. Furthermore, creating energy insecurity, and political instability, and economic downturn

Enhancing Energy Security Establishment of a comprehensive energy policy framework & strengthening institution’s coordination Long term energy resources management Building sufficient and robust energy infrastructure to enable domestic energy distribution and utilization Enhancement of transfer of advance energy technologies Developing and enhance utilization of alternative energy/fuels, improve non-carbon energy portfolio nerg

energy Inderdependence in the region Possible but…… “my country first” paradigm Demanding costly physical infrastructure (e.g. trans ASEAN natural gas pipeline, trans ASEAN electricity grid) Different among countries: market mechanism (e.g. pricing policy) environmental standard energy technology deployment Who control the energy resources?

Conclusion (1) Indonesia faces big challenges to ensure energy security from the supply and demand side. Review of situation of energy provision for a decade suggested that Indonesia is in situation of energy crisis that has dire consequences to the economy. High dependency on oil and natural gas, and deteriorating in energy infrastructure jeopardize energy security present and in the near future. Immediate response by taking measures and action to reduce oil and import of oil, improve non-carbon based portfolio to diversify energy supply, develop critical infrastructure for domestic energy distribution and utilization, and implement integrated resource planning and long term energy management, are extremely needed to avoid severe energy insecurity in near future.

Conclusion (2) Taking and applying measure to improve energy security of Indonesia may have impact to energy security in other country, in particular for those country that heavily dependent on energy resources from Indonesia (Singapore, Malaysia, China, Taiwan, South Korea). Energy interdependence concept in the region is possible but with huge challenge: nationalism, infrastructure, market harmonization. Financing and governance issues are needed to assess further. Delaying in taking proper responses will result in worsening energy supply that will effect future development of the country.

Thank You Fabby Tumiwa is director of Institute for Essential Services Reform (IESR), a non-profit, a public interest oriented think-thank for energy and climate change, based in Jakarta, Indonesia. Email: fabby@iesr- indonesia.org, website: www.iesr-indonesia.org