East Kalimantan Environmentally Sustainable Development Strategy

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BERAU
Berau is the third largest district in East Kalimantan by land size and is still more than 75 percent
covered by forests. The district’s 160,000 people make it quite sparsely populated at only 5 people
per square kilometer, and mining (40 percent of GDP) and forestry (30 percent of GDP) dominate the
economy. Fourteen companies hold over 880,000 ha of production forest concessions and three
companies hold 60,000 ha of HTI timber plantation concessions, which combined cover about 40
percent of Berau’s total land. The district’s large remaining forests but also the commitment of the
Berau government have made it attractive as a REDD demonstration area for Indonesia.
The district generates over 21 MtCO2e of emissions a year, 10 percent of East
Kalimantan’s total. Berau loses more than 24,000 ha of forest a year. The forestry sector
accounts for over 10 MtCO2e p.a., primarily from unsustainable logging in the HPH concessions.
In addition, there are existing location permits (Ijin lokasi) for opening 100,000 ha of palm oil
concessions, which will put additional pressure on Berau’s forests. The district’s emissions, mainly
stemming from changes in land use, are equivalent to the emissions of 4.5 million cars.
While emissions will grow under business as usual, Berau can reduce its emissions by
over 18 MtCO2e p.a. by 2030. The single largest initiative for Berau is implementing reduced
impact logging (RIL) in its HPH concessions (4.7 MtCO2e abatement); the district can first target
the three companies that each have over 100,000 ha of concessions. A further 3.7 MtCO2e and 1.8
MtCO2e of reductions are possible by using degraded lands for the expansion of HTI and palm oil
concessions, respectively. The district has over 125,000 of very critical and critical lands that can
be used for this initiative. Additional abatement comes from the agriculture and coal sectors.
Berau can benefit from improved productivity in the forestry sector. Berau already has East
Kalimantan’s only pulp and paper mill, but over the past years it has often run below capacity or
been closed, due to lack of pulpwood inputs. Improving productivity in the pulpwood plantations,
and more efficient use of wood from RIL forestry operations could provide enough supply to
ensure the pulp and paper mill can operate at full capacity. With its water access, existing HTI
concessions, and port, Berau could even potentially be the site for a new forest products industry
cluster around the already existing mill, making use of timber and wood residues from the rest of
the province.
BONTANG
DRAFT
Bontang is the LNG and gas center of East Kalimantan, resulting in the second highest
district GDP at over IDR 25 trillion in 2006. The Bontang LNG plant, the largest in Indonesia,
dominates the city’s GDP at over 90 percent of the total (EXHIBIT 61). On a per capita measure,
Bontang’s GDP is over IDR 200 million per person, about eight times as great as Balikpapan’s. The
city’s development since the 1970s has followed that of two companies based on gas, PT Badak
Liquid Natural Gas and PT Pupuk Kaltim, which produces ammonia and fertilizer using natural gas.
However, with the decline of the province’s major gas fields, the LNG plant capacity has declined to
80 percent today and is projected to decline further, particularly as Total’s offshore Makaham field
moves off-plateau and experiences declining production.
Bontang has 18.5 MtCO2e of emissions which stem almost exclusively from its oil and
gas industry. With just 125,000 people and only 3,000 ha of forest, Bontang has few emissions
from land-use changes, power, or transport. The LNG plant, though, is estimated to generate 15
MtCO2e as it consumes substantial energy to cool and pressurize the natural gas for transport.
Emissions also result from flaring in the LNG process and from transporting the LNG to market.
Bontang has few abatement options in the priority sectors. The city can encourage process
efficiencies and reduce emission from the LNG plant by 0.8 MtCO2e. With annual deforestation at
just 150 ha, there is little avoided deforestation abatement potential.