1. 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

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

3. 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

4. Fuel Shortage…..

6. 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

8. APERC’s Energy Security Indicators: 1. Diversification of energy supply sources; 2. Net energy import dependency; 3. Non-carbon based fuel portfolio; 4. Net oil import dependency and Middle East oil import dependency. Source: APERC, 2007

9. 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

10. 1970 Oil : 88% Natural Gas: 6% Coal: 1% Hydro: 5% Geothermal: 0% 2006 Oil : 47% Natural Gas: 22% Coal: 23% Hydro: 2% Geothermal: 5% Source: DGEEU, 2005, MEMR, 2007

11. Energy SourcesPotential ResourcesInstalled Capacity Hydro Power75,670 MW4,200 MW Micro and Mini Hydro450 MW210 MW Geothermal27,150 MW1,042 MW Biomass49,810 MW445 MW Solar Power4.8 kWh/m 2 /day12 MW Wind Power9,280 MW3 MW Source: MEMR 2007

12. Energy Resources Potential Resources Proven Reserve (R) Production (P) R/P Ratio (years) Crude oil 56.6 billion barrels 8.4 billion barrels 348 million barrel 24 Natural gas334.5 TSCF165 TSCF2.79 TSCF59 Coal90.5 billion ton18.7 billion ton 215 million ton 86 Coalbed Methane 453 TSCF--- Source: MEMR (2008)

13. Source: EIA (2006)

14. Source: EIA (2004)

15. Source: Coal Business Association (2008)

16. Export of Primary Energy Export of Final Energy Source: MEMR 2007

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

18. 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).

19. 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.

20. 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)

21. 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

22. Climate change control: GHGs mitigation External pressure to energy trading policy and priorities Voluntary commitment along with international negotiation Opportunity from carbon market

23. 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

24. 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

25. 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?

26. 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.

27. 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.

28. 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.orgfabby@iesr- indonesia.orgwww.iesr-indonesia.org