In the midst of declining petroleum production, gas has a strategic role in fulfilling energy needs and national industrial development. Gas is also deemed as an alternative energy that is cleaner for the environment compared to petroleum and coal. However, according to Maryati Abdullah, national coordinator of PWYP Indonesia in the public discussion on national gas management, gas utilization still faces some challenges. Including the development of gas infrastructure, the minimum of upstream gas investment and the discovery of new reserves, economic growth among region, gas trading system, and gas prices for industry.
In line with Maryati, Prof. Dr. Emil Salim, Board of EITI Indonesia in his keynote speech asserted, “It’s urgent to push for greater transparency in the national gas management. The open market nature of the industry enables traders who don’t have facilities and end users to flourish. Thus, it leads to a layered retail phenomenon.”
Challenges in managing gas is found in all streams, from upstream, mid-stream, to downstream. Komaidi Notonegoro, the Director of Reforminer Institute who also spoke at the forum, said that the upstream sector still has problems with licensing and the economics of the project. It is estimated that there are around 373 permits involving 17 Ministries/Institutions, even though the Ministry of Energy and Mineral Resources (MoEMR) has simplified the permits, from 104 to 40 permits. But licensing in other ministries/institutions still has many unraveled problems.
2018 Policy Performance Index issued by the Fraser Institute shows that Indonesia ranks 71th out of 80 countries in term of investment climate in the oil and gas sector. Bureaucracy and heavy regulations are deemed as the culprit behind a decline investment in the upstream oil and gas sector. Also added with risky gas reserves locations in the offshore and deep-sea waters which prolongs the period of exploration phase.
Other challenges in gas management are the gas price, in both upstream and end users. The issuance of Presidential Regulation number 40 year 2016 about the determination of gas price at a maximum of 6 USD/MMbtu for specific industries, cannot immediately be implemented. It is due to different character of each wellhead, so the price cannot be generalized at 6 USDM/MMbtu. An institution which facilitates cross-subsidies between contractors (KKKS) which has gas price below and above 6 USD/MMbtu in the wellhead is needed to fully adopt such pricing mechanism.
Responding to this, Andang Bachtiar, Secretary General of the Association of Oil and Gas Producing Regions, said that as an alternative to reduce gas prices, considering the gas as the capital of development, the government can reduce its split. The split reduction was converted to encourage the advancement of gas user industries.
Besides the problem of gas price and investment in the upstream sector, another challenge is infrastructure development. Dirgo D Purbo, the board of expert of Prabowo-Sandi National Campaign Agency said that the unintegrated gas infrastructure severely affects the industries. For instance, the industries in East Java which are ‘difficult to develop’ due to the uncertainty of gas supply and the high price of gas.
Seconding Dirgo’s opinion, Joefrizal, a member of the Indonesia Petroleum Association, stated that it is necessary to encourage the formation of massive markets to reduce gas prices. To form an enormous market, we need to build an integrated infrastructure.
Tumiran, Member of the National Energy Council (DEN), said that the direction of gas utilization in the future is more for domestic, one of which is to improve the competitiveness of the national industries. There is already a National Energy General Plan (RUEN) which serves a the road map and scenario for domestic energy use. “What needs to be considered is the sectoral ego of each institution, so that this RUEN can be implemented together,” said Tumiran.
Besides that, the government needs to make an energy composition (supply and demand) for economic growth. Also formulate a national industry road map towards 2050, so that all relevant ministries/institutions can take proper measures to achieve that goal.