indonesia

new capacity between 2015 and 2019, 70% of which is expected to come from the private sector. 4
To put this number in context, the country’s total generation capacity at the end of 2014 was
51,620 MW. 5 More significantly, 60% of that capacity will be coal-fired, as the government sees
domestic coal as a solution to the country’s energy and electricity poverty. 6 In official forecasts,
authorities see coal consumption tripling between 2013 and 2035. 7 At a time when other countries
are looking for ways to restrict coal to meet targets for emissions mitigation, the Indonesian
government is doubling down on coal.
The move toward coal is logical: the country has abundant coal reserves, and in 2014 its
coal production was seven times as high as its oil production and four times as high as its gas
production. 8 Indonesia may be a major oil and gas producer, but it is a far greater coal producer and
exporter: in 2014 the country earned $48 billion from exports of oil, gas, and coal, and $21 billion
of that came from coal. 9 Yet the shift toward coal is also a recognition that alternative sources of
power generation cannot meet Indonesia’s energy needs. The move toward coal is in part a failure
of gas, whose importance in the country’s energy mix and in planning has waned in recent years.
If it is to limit the massive environmental consequences of a shift toward coal, Indonesia needs to
re-energize its natural gas industry: a healthy and revitalized gas industry is essential to not only
Indonesia’s but also the world’s energy and environmental health.
Natural Gas: National Surplus, Local Deficit
Indonesia had long produced associated gas, but the country did not fully exploit its gas
resources until the late 1970s. 10 Discoveries in Northern Sumatra (Arun in 1971) and East
Kalimantan (Badak in 1972) enabled the country to develop two LNG-export projects—Arun
and Bontang—which shipped their first LNG in 1978 and 1977, respectively. 11 Export projects
generated revenue for the treasury and turned Indonesia into the largest LNG exporter in the
world, a position it held until 2006, when it was surpassed by Qatar. 12
Exports, however, did little to help develop a national gas market. Some local demand emerged
around export facilities, especially Arun, 13 but the gas market was otherwise built around pockets
of supply and demand—a situation that is only now being slowly rectified. Java is the largest gas
demand center, consuming roughly 53% of the country’s gas. Most of this gas is used in the power
4 “35,000 MW untuk Indonesia” [35,000 MW for Indonesia], PLN, 2015, http://www.pln.co.id/wp-content/uploads/2015/04/
35000-MW2.pdf.
5 PLN, “Annual Report 2014,” 2014, 16, http://www.pln.co.id/eng/?p=55.
6 Leo Jegho, “Power Up Indonesia, President Jokowi to Launch Ambitious 35,000 MW Electricity Projects,” Global Indonesian Voices,
April 13, 2015, http://www.globalindonesianvoices.com/20180/power-up-indonesia-president-jokowi-to-launch-ambitious-35000-mwelectricity-projects.
7 National Energy Board (Indonesia), “Outlook energi Indonesia 2014” [Indonesia Energy Outlook 2014], 2014, http://www.den.go.id/
upload/outlookenergi/file/outlookenergi.pdf.
8 BP plc, “BP Statistical Review of World Energy 2015.”
9 “V.10. Nilai ekspor menurut komoditas” [V.10. Value of Exports by Sector Commodity], Central Bank of Indonesia, Indonesian Financial
Statistics, http://www.bi.go.id/seki/tabel/TABEL5_10.pdf.
10 Associated gas is gas produced from an oil field.
11 “Milestones,” Badak LNG, http://www.badaklng.co.id/milestone.html; and “Corporate Profile: History,” PT Arun NGL, http://arunlng.co.id/
Profile/Default.aspx.
12 BP plc, “BP Statistical Review of World Energy 2007,” June 2007.
13 For reference to sales to fertilizer and paper plants, see “ExxonMobil in Indonesia Milestones 1898–2010,” Exxon Mobil, http://www.
exxonmobil.com/Indonesia-English/PA/about_history.aspx.
INDONESIA: THE NEXUS OF GAS AND ELECTRICITY u BRAVO AND TSAFOS
37