Page 5 - AsianOil Week 43 2022

AsianOil COMMENTARY AsianOil

from a series of setbacks. The government has the question is what energy source will serve
been wrangling for years with the developers to as coal’s replacement. Renewables potential in
push for an onshore LNG plant. Their original Indonesia is significant – it is estimated that the
preference had been an offshore terminal. Shell country could host 94.3 GW of hydropower,
subsequently opted to withdraw from the pro- 207.8 GW of solar, 60.6 GW of wind, 28.5 GW
ject in 2020, but in a telling sign, has not yet been of geothermal and 18 GW of tidal energy. But
able to divest its stake, in part because Jakarta is the deployment of projects has been very slow,
eager to see domestic investors involved. Placing because of high costs and Indonesia’s perennial
another burden on the project, Indonesia now problems securing investment. Indonesia could
wants to add costly carbon capture and storage receive clean energy from the proposed Aus-
equipment. tralia-Asia Transmission Link, but the 20-GW
In its latest attempt to revive the project, project is a distant prospect, and will first serve
Japan’s government in July offered financing to Singapore’s needs.
support a bid by Indonesia’s PT Pertamina or If, then, Indonesia is serious about replac-
Indonesia’s sovereign wealth fund to buy out ing coal, the near-term solution is expanding
Shell. It remains to be seen how this will play out, domestic gas use, and that will only be possible
but Masela has already fallen three years behind with LNG imports. State energy regulator SKK
schedule, with Inpex now predicting its launch Migas has estimated that domestic gas output
in the early 2030s. could double to 124 bcm by 2030, but with the
problems with investment looking unlikely
A replacement for coal to clear up, that is unrealistic, to say the least.
With the decline in Indonesia’s gas output, the It would also be hard for Indonesia to source
country’s prioritisation of domestic gas supply imported gas via pipeline, in the short term. The
has not led to higher volumes for the home mar- solution, then, is LNG imports.
ket. As a result, Indonesian gas consumption fell There are already a number of facilities that
from 42.7 bcm in 2011 to only 37.1 bcm in 2021, currently serve as liquefaction plants that could
while the share of gas in primary energy supply be repurposed relatively easily to regasify LNG.
dropped from 22% to 17%. Instead, Indonesia But a substantial amount of new capacity would
has ramped up coal-fired generation, which also be needed. Exactly how much of regasifica-
now accounts for 61.4% of total power genera- tion capacity will depend on how serious Indo-
tion, versus 54.5% in 2016. This shift, which has nesia’s government is about kicking its coal habit.
been very detrimental to Indonesia’s climate In the short term, the high cost of gas compared
objectives, has been supported by a substantial with coal is a disincentive. However, with a large
increase in domestic coal production. amount of under-utilised gas power generation
But as the country comes under increasing capacity, connected already with LNG terminals
international pressure to commit to reducing that could be repurposed, there is a clear ration-
emissions, and with less and less gas available, ale in the long term for pursuing this strategy. ™

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