indonesia

gas prices: between 2010 and 2014, the cost of coal-fired generation rose by only 21%, whereas the
cost of gas-fired generation rose by 80% as gas prices increased. 31
In its latest long-term outlook, the National Energy Board (DEN, for Dewan Energi Nasional)
reinforced the growing reliance on coal. DEN forecasts a doubling of energy use between 2013
and 2030, and an increase of four and half times current energy use through 2050 (with no
slowdown in energy consumption). 32 By 2020, DEN expects coal to become the dominant fuel
and retain its role through 2045—at which point “new and renewable energies” will take over. 33
Oil and gas will continue to grow, of course—gas use is expected to double through 2025—but the
forecast demonstrates a strong reliance on coal and new and renewable energy. Other forecasts
show a similar trend: the International Energy Agency (IEA) expects that coal will surpass oil
as the dominant fuel sometime between 2025 and 2035. 34 The Institute for Energy Economics,
Japan, sees a growing role for coal as well, with coal surpassing gas by 2020, but it expects oil to
remain the largest energy source through 2040 (at a level that is higher than either DEN or the IEA
forecasts). 35 In short, coal is widely regarded as a major solution to Indonesia’s energy needs, with
gas playing a secondary role.
This reliance on coal will have widespread side-effects, but the full impact on the environment
and on society will depend on two factors. The first factor is whether Indonesia will deploy advanced
technology and build ultra-supercritical coal plants rather than subcritical or supercritical plants,
a task that has been made harder by tighter restrictions on public financing for coal projects. The
second factor is whether Indonesia will develop a more comprehensive roadmap for stakeholder
engagement about where plants are constructed so as to minimize the social, economic, and
environmental footprint of these plants and ensure that they are developed with the health, safety,
and livelihood of the local populations in mind. 36 Moreover, the turn to coal is partly based on an
unreasonably pessimistic view of domestic gas potential, which the next section will consider. A
better than expected outcome for gas could further reduce the country’s turn to coal.
Unlocking Gas Supply
Opportunities for Development and Exploration
It is hard to see a scenario whereby Indonesia will not rely heavily on coal for its future electricity
needs. Yet natural gas could help constrain the growth in coal demand; after all, Indonesia holds
considerable potential in natural gas, possessing conventional gas reserves that are greater than
those of all other countries in Southeast Asia and are the third-largest in Asia after Australia
and China. 37 Exploration also continues in the less-explored waters of western Indonesia, where
there is great potential in deepwater basins. In addition, there has been progress on important
gas projects across the country, with several beginning operation in 2015: Pertamina, Medco,
31 PLN, “Annual Report 2014,” 188.
32 National Energy Board (Indonesia), “Outlook energi Indonesia 2014.”
33 New and renewable energies include biodiesel and, after 2025, 15 GW of nuclear power.
34 IEA, “Southeast Asia Energy Outlook 2015,” World Energy Outlook Special Report, 2015, https://www.iea.org/publications/
freepublications/publication/WEO2015_SouthEastAsia.pdf.
35 Institute of Energy Economics, Japan, “Asia/World Energy Outlook 2014,” October 2014, http://eneken.ieej.or.jp/data/5875.pdf.
42
NBR
36 Justin Sink and Alex Nussbaum, “In Coal Setback, Rich Nations Agree to End Export Credits,” Bloomberg Business, November 17, 2015,
http://www.bloomberg.com/news/articles/2015-11-18/in-latest-blow-to-coal-rich-nations-agree-to-end-export-credits.
37 BP plc, “BP Statistical Review of World Energy 2015.”
SPECIAL REPORT u DECEMBER 2015