Publications

Indonesia has been subsidizing domestic fuel, oil based fuel energy (OBE) since the 1950s. Since 1997, however, Indonesia has become a net oil importer. It is the time for other, less expensive, more efficient and more environmentally friendly energy, such as natural gas based energy (NGBE) to become the front-runner of subsidized energy in Indonesia. NGBE export would superficially seem to be a source of hard currency surpluses. However, closer study reveals that income from this energy source was much lower than the amount of the Government OBE subsidy. Considering how the NGBE subsidy is substantially lower than the OBE subsidy, maximizing NGBE for domestic use will in fact reduce OBE demand, which in turn will not only reduce the Government energy subsidy but also will positively impact the Governments financial balance sheet. And, more importantly, it will provide less expensive energy for the Indonesian economy, specifically for communities and small-size business entities/industries. In short, exporting NGBE would mean “giving away less expensive energy to other countries and “forcing Indonesia to buy more expensive imported energy. This is more of a losing game than a hard currency earning scheme. The lack of NGBE infrastructure is the main hurdle in maximizing domestic natural gas usage and is tied to the notion of high investment costs: total investment needed to implement an energy substitution policy is only about US$ 10.72 billion, far less than the US$ 51.1 billion totaled over the last seven years. In 2008 alone the Government subsidy reached US$13.9 billion. Further, many private entities have expressed interest in the infrastructure investment, and will therefore not burden Government spending to an appreciable degree. In order for NGBE infrastructure be developed in an efficient and effective manner, a semi-governmental independent authority body should be put in place. Such an independent body would be vested with full authority to coordinate NGBE infrastructure development across multiple institutions, such as the Departments of Energy, Mines and Minerals, Forestry, Finance, Environment, Land Ownership and others. (BPH Migas)