East Kalimantan Environmentally Sustainable Development Strategy

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Box 8
also natural gas as an input. We recognize that we will need to work with the national investment
board and regulatory agencies to encourage new investment into CBM.
Abatement Potential
Emissions from the oil and gas sector are forecasted to fall naturally from 18.5 to 11.4
MtCO2e as oil and gas production declines under business as usual. Emissions from
the Balikpapan refinery would remain constant as the plant continues to operate at capacity.
Emissions from the upstream processes to produce oil and gas would decline as oil and gas
production decreases. In addition, under business as usual, the emissions from flaring would
decline in tandem with the decline of upstream oil production.
The revival of the oil and gas sector, through the implementation of the GDP improvement
initiatives outlined above, would counteract the natural decline in emissions under
business as usual. With the decline of oil and gas production, the total emissions of the oil and
gas sector are estimated to naturally decline from 18.5 MtCO2e in 2008 to 11.4 MtCO2e in 2030.
However, the GDP improvement initiatives above would see higher production of oil, conventional
gas, CBM gas, and LNG, which would push total sector emissions to 26.3 MtCO2e by 2030.
Three abatement initiatives have been identified for the oil and gas sector that could
reduce emissions by 2.8 MtCO2e, equal to 10 percent of the revived oil and gas sector’s
emissions. Implementation of a zero flaring program in East Kalimantan would result in emission
abatement of 1.7 MtCO2e p.a. by 2030. The Ministry of Energy and Mineral Resources, under the
Green Oil & Gas Industry Initiatives, has targeted Indonesia to reach zero flaring by 2025. East
Kalimantan could be the first pilot province for this program and introduce a Kaltim Zero Flare
program (Box 8). The total cost, in present value, of implementing this initiative would be USD 8 to
10 per tCO2e p.a. by 2030.
Zero Flaring is Possible and Could Be Cost Negative
It is possible to achieve the negative cost of zero flaring from a technical perspective. There are many
viable options for utilizing associated gas from a field; the appropriate option depends on the amount
of gas and the characteristics of the field. If the field is near existing gas infrastructure and pipelines,
the associated gas can be sold commercially into the system (after investing in connecting pipelines)
instead of flared. If there is no gas grid within an economical distance, excess gas can be sold to
neighboring energy-intensive factories or local power plants. If this is not available or the amount of
gas is small, then the excess gas can be used for power generators and compressors at the field site,
replacing diesel fuel. The gas can also be reinjected into the reservoir itself to maintain pressure and
production levels under the right circumstances.
In addition to the revenues and cost savings from the above options, there is the potential to receive
CDM funding for flare reduction initiatives. At the Tambun and Pondok Tengah fields, up to 40
mmcfd of flared gas is utilized for power generation, and the estimated carbon reduction is around
0.4 MtCO2e p.a. Thus, zero flaring, in many cases, can be achieved at a negative cost.
DRAFT
Implementation of an LNG plant operational improvement program, such as improved
planning, would reduce emissions by 0.8 MtCO2e p.a. Improved planning can save fuel,
as plants can reduce unnecessary pressurization and depressurization by actively matching
compression needs with natural gas demand. In addition, improved planning places emphasis on
running compressors at their most efficient point, called the working point. The total cost, in present
value, of implementing this initiative would be negative USD 19 to 28 per tCO2e p.a. by 2030, as the
revenues and cost savings from improved planning outweigh the cost of equipment and investment.