From
Oil to Gas Fuels:
Opportunity
for Local, Foreign Investors
Henricus W. Ismanthono, A LECTURER AT THE FACULTY OF ECONOMICS,
ATMA JAYA CATHOLICS UNIVERSITY, JAKARTA
Sumber
: JAKARTA POST, 23 Februari 2012
There have been issues related to the use of
gas fuel as an alternative energy in transportation as the government seems to
have been “trapped” by the fact that national fuel subsidies have increased
year by year. Indonesia had been a major oil producer until 2008 when
production decreased steadily.
As a result, Indonesia became a net oil importer and had to quit its membership in the Organization of Petroleum Exporting Countries (OPEC) in the same year.
As a flashback, Indonesia was one of the most promising countries for oil and gas investment. The history of oil exploration in Indonesia dates back to 1871, when the country was under Dutch rule.
However, it was not until June 15, 1885, that oil was commercially exploited in Telaga Said, North Sumatra. As the search for oil intensified, several foreign oil firms then invested in the country.
The first generation of Production Sharing Contracts (PSC) was introduced by the government in 1966. Agreements were then signed with Refican, IIAPCO, Japex and Kyushu and approved by the president of the Republic in January 1967.
Within two years after the first PSC was signed, the number of such contracts had risen to cover 27 sites operated by 26 foreign oil companies.
By 1970, Pertamina was actively working with 34 foreign oil companies, mostly from the United States.
At the end of 1983, there were 84 PSCs operated by 37 foreign oil companies. The first successful production in a PSC area occurred in 1971, at the Pertamina — Sinclair (ARCO) — IIAPCO contract area in the Java Sea.
In the early 1970s, major gas fields were also discovered in East Kalimantan and northern Sumatra, leading to the development of a substantial export business in liquefied natural gas (LNG) since 1977.
Cooperation between Pertamina and various foreign contractors has resulted in significant growth in oil and gas exploration and production activities, enabling Indonesia to become a substantial oil exporter to the circum-Pacific region. High levels of exploration activity in Indonesia testify to the country’s continued attractiveness worldwide as a source of oil and gas.
As a result, Indonesia became a net oil importer and had to quit its membership in the Organization of Petroleum Exporting Countries (OPEC) in the same year.
As a flashback, Indonesia was one of the most promising countries for oil and gas investment. The history of oil exploration in Indonesia dates back to 1871, when the country was under Dutch rule.
However, it was not until June 15, 1885, that oil was commercially exploited in Telaga Said, North Sumatra. As the search for oil intensified, several foreign oil firms then invested in the country.
The first generation of Production Sharing Contracts (PSC) was introduced by the government in 1966. Agreements were then signed with Refican, IIAPCO, Japex and Kyushu and approved by the president of the Republic in January 1967.
Within two years after the first PSC was signed, the number of such contracts had risen to cover 27 sites operated by 26 foreign oil companies.
By 1970, Pertamina was actively working with 34 foreign oil companies, mostly from the United States.
At the end of 1983, there were 84 PSCs operated by 37 foreign oil companies. The first successful production in a PSC area occurred in 1971, at the Pertamina — Sinclair (ARCO) — IIAPCO contract area in the Java Sea.
In the early 1970s, major gas fields were also discovered in East Kalimantan and northern Sumatra, leading to the development of a substantial export business in liquefied natural gas (LNG) since 1977.
Cooperation between Pertamina and various foreign contractors has resulted in significant growth in oil and gas exploration and production activities, enabling Indonesia to become a substantial oil exporter to the circum-Pacific region. High levels of exploration activity in Indonesia testify to the country’s continued attractiveness worldwide as a source of oil and gas.
As business development went by with a few
changes made due to investment slowdown, different styles of law enforcement,
as well as a lack of management and costly technical know-how, oil production
then decreased quite significantly.
However, as the need for oil rose, particularly due to the development of the economy and the greater number of cars and motorcycles, the country became dependent on using oil-based fuels especially for transportation and electric power.
This means an increase in subsidies that has turned out to be a major problem for the government and thus in need of immediate solution.
In addition to geothermal and coal as energy sources, the development of alternative energies such as bio-fuels, solar power, wind energy, ocean power and nuclear power, seem like a “dream” as they have received little attention from the government.
The government now has two alternative energy-management solutions: to prevent end-users from using premium grade fuel or to raise the price of premium for them.
There are of course pros and cons with both of these choices, particularly relating to the inflation rate, the amount of subsidy and the social effects — the purchasing power of the needy. We do hope that social unrest, such as that in Nigeria recently, will not happen here.
Reports say that increasing the price of premium-grade fuel is likely to be the best choice as it will certainly decrease the subsidy for oil fuels. Consequently, the cost of public transportation and prices of commodities will rise by between 20 to 30 percent.
To remedy its impact, the government will provide “direct cash aid” to the needy — those who have babies and pre-school kids.
In response to the idea of using gas fuel for motorized vehicles, the government is now developing infrastructure and vehicle equipment (converter kit, gas tank, etc.) for its implementation.
There are pros and cons regarding the use of gas fuel particularly safety concerns and the high price of the converter kits for vehicles.
While the number of gas stations (SPBG) is not yet enough to supply gas for vehicles, the converter kits still have to be imported from countries such as Italy and South Korea, although it is possible to manufacture them domestically.
Safety, however, should not be a serious area of concern as research has shown that there have been no negative reports so far from countries that have been using gas fuel such as Italy (2.5 million cars), Russia (1.2 million), Pakistan (2.7 million), Iran (1.95 million), South Korea (2.53 million), India (1.1 million), Thailand (473,000), Australia (655,000), China (590,000) and Malaysia (42,600).
Projection needs for gas fuel for both Compressed Natural Gas (CNG) in million square cubic feet per day (mmscfd) and Liquid Gas for Vehicle (LGV) in metric tons respectively per day in Indonesia
(according to the Energy and Mineral Resources Ministry) are as follows: In 2012 — 32.2 mmscfd of CNG and 681,199 metric tons of LGV for Java and Bali; in 2013 — 65.6 mmscfd of CNG and 1,089,918 metric tons of LGV for Java and Bali, 8.8 mmscfd of CNG and 239,782 metric tons of LGV for Sumatra, 0.8 mmscfd for CNG and 87,793 metric tons of LGV for Kalimantan; in 2014 — 82 mmscfd of CNG and 1.353.640 metric tons of LGV for Java and Bali, 13.2 mmscfd of CNG and 297,861 metric tons of LGV for Sumatra, 1.2 mmscfd of CNG and 108,313 metric tons of LGV for Kalimantan, 0.32 mmscfd of CNG and 94,774 metric tons of LGV for Sulawesi and 14,253 metric tons of LGV for Maluku and Papua.
The potential vehicle use of both CNG and LGV respectively per day in the country is as follows: In 2012: 48,904 mmscfd and 23,673 metric tons, in 2013: 41,564 mmscfd and 377,826 metric tons, and in 2014: 20,248 mmscfd and 469,232 metric tons.
National car producers are also expected to use gas fuels. The Kiat Esemka has reportedly been receiving around 3,000 orders mainly from government offices including regional governments, the Army and the House of Representatives.
Along with potential cooperation with European car producers in its production, it has also been suggested that gas fuel be used for such state-owned vehicles.
In conclusion, we can see a huge investment opportunity in the production of equipment and gas fuels, as well as the development of gas filling stations in the country.
Foreign investors should be cordially invited to lay out business plans in this business. ●
However, as the need for oil rose, particularly due to the development of the economy and the greater number of cars and motorcycles, the country became dependent on using oil-based fuels especially for transportation and electric power.
This means an increase in subsidies that has turned out to be a major problem for the government and thus in need of immediate solution.
In addition to geothermal and coal as energy sources, the development of alternative energies such as bio-fuels, solar power, wind energy, ocean power and nuclear power, seem like a “dream” as they have received little attention from the government.
The government now has two alternative energy-management solutions: to prevent end-users from using premium grade fuel or to raise the price of premium for them.
There are of course pros and cons with both of these choices, particularly relating to the inflation rate, the amount of subsidy and the social effects — the purchasing power of the needy. We do hope that social unrest, such as that in Nigeria recently, will not happen here.
Reports say that increasing the price of premium-grade fuel is likely to be the best choice as it will certainly decrease the subsidy for oil fuels. Consequently, the cost of public transportation and prices of commodities will rise by between 20 to 30 percent.
To remedy its impact, the government will provide “direct cash aid” to the needy — those who have babies and pre-school kids.
In response to the idea of using gas fuel for motorized vehicles, the government is now developing infrastructure and vehicle equipment (converter kit, gas tank, etc.) for its implementation.
There are pros and cons regarding the use of gas fuel particularly safety concerns and the high price of the converter kits for vehicles.
While the number of gas stations (SPBG) is not yet enough to supply gas for vehicles, the converter kits still have to be imported from countries such as Italy and South Korea, although it is possible to manufacture them domestically.
Safety, however, should not be a serious area of concern as research has shown that there have been no negative reports so far from countries that have been using gas fuel such as Italy (2.5 million cars), Russia (1.2 million), Pakistan (2.7 million), Iran (1.95 million), South Korea (2.53 million), India (1.1 million), Thailand (473,000), Australia (655,000), China (590,000) and Malaysia (42,600).
Projection needs for gas fuel for both Compressed Natural Gas (CNG) in million square cubic feet per day (mmscfd) and Liquid Gas for Vehicle (LGV) in metric tons respectively per day in Indonesia
(according to the Energy and Mineral Resources Ministry) are as follows: In 2012 — 32.2 mmscfd of CNG and 681,199 metric tons of LGV for Java and Bali; in 2013 — 65.6 mmscfd of CNG and 1,089,918 metric tons of LGV for Java and Bali, 8.8 mmscfd of CNG and 239,782 metric tons of LGV for Sumatra, 0.8 mmscfd for CNG and 87,793 metric tons of LGV for Kalimantan; in 2014 — 82 mmscfd of CNG and 1.353.640 metric tons of LGV for Java and Bali, 13.2 mmscfd of CNG and 297,861 metric tons of LGV for Sumatra, 1.2 mmscfd of CNG and 108,313 metric tons of LGV for Kalimantan, 0.32 mmscfd of CNG and 94,774 metric tons of LGV for Sulawesi and 14,253 metric tons of LGV for Maluku and Papua.
The potential vehicle use of both CNG and LGV respectively per day in the country is as follows: In 2012: 48,904 mmscfd and 23,673 metric tons, in 2013: 41,564 mmscfd and 377,826 metric tons, and in 2014: 20,248 mmscfd and 469,232 metric tons.
National car producers are also expected to use gas fuels. The Kiat Esemka has reportedly been receiving around 3,000 orders mainly from government offices including regional governments, the Army and the House of Representatives.
Along with potential cooperation with European car producers in its production, it has also been suggested that gas fuel be used for such state-owned vehicles.
In conclusion, we can see a huge investment opportunity in the production of equipment and gas fuels, as well as the development of gas filling stations in the country.
Foreign investors should be cordially invited to lay out business plans in this business. ●
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