While some analysis reports in previous century forecasted the oil depletion in the significant amount of oil reservoirs till the end of second decade in 21st century, the recent oil exploration projects backed by new technologies raised the oil proved reserves to 1,706.7 billion barrels of oil in 2016 (more than 48.7% comparing with 1996). Simultaneously, the proved reserves of Natural Gas was raised from 123.5 Trillion cubic meters in 1996 to 186.6 Tcm in 2016 (hiked by 56.5%).(1)
Of course, Hydrocarbons (Crude Oil and Natural Gas) are the main world’s primary energy source yet, while the Crude Oil was in the first stand in 2016 (by share of 33% of world’s primary energy source) and Natural Gas was in third place (by share of 25% of world’s primary energy source). (1)
Despite all the environmental concerns, cost raising issues and risks of supplying in the political crisis, hydrocarbon’s share in total world primary energy source is still about 60% which means the actual dependence of world economy to the hydrocarbon sources.
The members of OPEC (Organization of Oil Exporter Countries) as one of the most important players in the world energy market could consolidate their rank in supplying hydrocarbon products during 21st century, where they retain their place in the world oil market by producing about 42% of the world oil production during 2001 to 2016. Meanwhile, their share in the world natural gas production was sharply increased by 21% in 2016 comparing to 13.47% in 2001. Totally, OPEC’s hydrocarbon products supplied 20% of the world total primary energy in 2016 which keeps them in the rolling position of the world energy market, but if they continue conducting their current energy polices, they would not be able to supply their internal demand even in the future.(1)
Regardless of their production volume or related costs and international oil and gas prices, the most of hydrocarbon exporter countries, particularly the OPEC members, deal with their reserves and revenues, similarly. They rely on hydrocarbon products, not only for supplying their energy sources but also it is considered as their main income source, so far from world energy markets.
Hydrocarbon’s rent in OPEC GDP
The oil rent (% of GDP) in OPEC members was about 25 in 2014. This indicator was 23.7 in 2001 and 33 in 2011, approximately. Contrary to a downturn from 2011 to 2014 which occurred mainly because of falls in the oil price, the trend of this indicator between 2001 to 2014 was ascending that could represent the OPEC members’ dependence to the oil values(2).
The most radical increase was reported in Kuwait, while it was raised from 38.3 to 53.4, as well as the Kuwait’s oil rent (%GDP) is the highest rate in the world.
The reliance of OPEC members’ GDP to the natural gas value is the same as oil. The natural gas rent (%GDP) of OPEC members was doubled roughly, from 2001 to 2014(2).
Wholly, the total hydrocarbon’s rent (% GDP) for OPEC members was about 34% in 2011 and more than 26.4 in 2014, which could be addressed as a factor of affiliation OPEC members’ economy to the hydrocarbons.
Hydrocarbons in supplying internal demands
Meanwhile the role of hydrocarbon product in supplying internal demand of exporter countries is as its importance in making value for them. A significant amount of OPEC members’ hydrocarbon production is used for supplying internal demands, more than any other sources.
Analyzing energy consumption data in OPEC countries and comparing with OECD, EU and World would indicate the differences between their fuel strategies and plans.
While during 2001 to 2014, OPEC members’ population was increased by 35%, their share in producing CO2 emissions was raised twice (70.34%) (2). In the same period of time, the population in OECD countries was raised by 10% but their share in CO2 emission was declined by 4%. In the same condition, the EU’s population rose about 4.5% from 2001 to 2014, but their CO2 emission amount was decreased sharply by 19%.
Moreover, the radical raises in the OPEC members’ consumption (from 2001 to 2014) neutralized the developments in their oil and gas industry and enhancing their production rate. While they could increase their oil production by 27.9%, their consumption rose by 91.3%, As well as, a significant amount of 125.8% increasing in their Natural Gas production was lost by their boomed consumption by 124.4%. Totally, the OPEC members’ primary energy consumption was raised by 100.1% during this period of time.
The pattern of OPEC members in increasing the primary energy consumption was not conformed by the most of world and groups of countries. The world’s primary consumption was increased by 40%, this rate for OECD countries was 2% while in EU members was declined by 6%, in the same time.
Regarding to the lag of OPEC members in Renewable Energy production (Hydropower, Solar, Wind…), hydrocarbon products supplied more than 97% of total OPEC primary energy sources in 2016 while this rate for the world was about 57%, in the OECD members was less than 65% and for EU countries is 61%.
The risk of current dependences of OPEC members to the hydrocarbon products could ring the bells for their energy and economy, not only because of the threats by falling the international prices which could shrink their budget but also for their consumption pattern which could cut off their export or increase their cost of supplying internal demands. Consequently, the tragedy of oil and gas products for the economy of oil exporter countries is gaining to be extended to the security of supplying their energy demands. The domino of unavoidable challenges will occurred when their high internal hydrocarbon consumption increase the costs and decrease their export capability which could be intensified by expensive production costs and high required investments for more developments in their oil and gas fields.
Indonesian Coal Roadmap: Optimizing Utilization amid Global Tendency to Phasing Out
Authors: Razin Abdullah and Luky Yusgiantoro*
Indonesia is potentially losing state revenue of around USD 1.64-2.5 billion per year from the coal tax and non-tax revenues. Although currently Indonesia has abundant coal resources, especially thermal coal, the coal market is gradually shrinking. This shrinking market will negatively impact Indonesia’s economy. The revenue can be used for developing the country, such as for the provision of public infrastructures, improving public education and health services and many more.
One of the main causes of the shrinking coal market is the global tendency to shift to renewable energy (RE). Therefore, a roadmap is urgently needed by Indonesia as a guideline for optimizing the coal management so that it can be continuously utilized and not become neglected natural resources. The Indonesian Coal Roadmap should also offer detailed guidance on utilizing coal for the short-term, medium-term and long-term.
Why is the roadmap needed?
Indonesia’s total coal reserves is around 37.6 billion tons. If there are no additional reserves and the assumed production rate is 600 million tons/year, then coal production can continue for another 62 years. Even though Indonesia’s coal production was enormous, most of it was for export. In 2019, the export reached 454.5 million tons or almost 74% of the total production. Therefore, it shows a strong dependency of the Indonesian coal market on exports, with China and India as the main destinations. The strong dependency and the global trend towards clean energy made the threat of Indonesian coal abandonment increasingly real.
China, one of Indonesia’s main coal export destinations, has massive coal reserves and was the world’s largest coal producer. In addition, China also has the ambition to become a carbon-free country by 2060, following the European Union countries, which are targeting to achieve it in 2050. It means China and European Union countries would not produce more carbon dioxide than they captured by 2060 and 2050, respectively. Furthermore, India and China have the biggest and second-biggest solar park in the world. India leads with the 2.245GW Bhadla solar park, while China’s Qinghai solar park has a capacity of 2.2GW. Those two solar parks are almost four times larger than the U.S.’ biggest solar farm with a capacity of 579 MW. The above factors raise concerns that China and India, as the main export destinations for Indonesian coal, will reduce their coal imports in the next few years.
The indications of a global trend towards RE can be seen from the energy consumption trend in the U.S. In 2019, U.S. RE consumption exceeded coal for the first time in over 130 years. During 2008-2019, there has been a significant decrease in U.S coal consumption, down by around 49%. Therefore, without proper coal management planning and demand from abroad continues to decline, Indonesia will lose a large amount of state revenue. The value of the remaining coal resources will also drop drastically.
Besides the global market, the domestic use of coal is mostly intended for electricity generation. With the aggressive development of RE power plant technology, the generation prices are getting cheaper. Sooner or later, the RE power plant will replace the conventional coal power plant. Therefore, it is necessary to emphasize efforts to diversify coal products by promoting the downstream coal industries in the future Indonesian Coal Roadmap.
What should be included: the short-term plan
In designing the Indonesian Coal Roadmap, a special attention should be paid to planning the diversification of export destinations and the diversification of coal derivative products. In the short term, it is necessary to study the potential of other countries for the Indonesian coal market so that Indonesia is not only dependent on China and India. As for the medium and long term, it is necessary to plan the downstream coal industry development and map the future market potential.
For the short-term plan, the Asian market is still attractive for Indonesian coal. China and India are expected to continue to use a massive amount of coal. Vietnam is also another promising prospective destination. Vietnam is projected to increase its use of coal amidst the growing industrial sector. In this plan, the Indonesian government plays an essential role in building political relations with these countries so that Indonesian coal can be prioritized.
What should be included: the medium and long-term plans
For the medium and long-term plans, it is necessary to integrate the coal supply chain, the mining site and potential demand location for coal. Therefore, the coal logistics chain becomes more optimal and efficient, according to the mining site location, type of coal, and transportation mode to the end-user. Mapping is needed both for conventional coal utilization and downstream activities.
Particularly for the downstream activities, the roadmap needs to include a map of the low-rank coal (LRC) potentials in Indonesia, which can be used for coal gasification and liquefaction. Coal gasification can produce methanol, dimethyl ether (a substitute for LPG) and, indirectly, produce synthetic oil. Meanwhile, the main product of coal liquefaction is synthetic oil, which can substitute conventional oil fuels. By promoting the downstream coal activities, the government can increase coal’s added value, get a multiplier effect, and reduce petroleum products imports.
The Indonesian Coal Roadmap also needs to consider related existing and planned regulations so that it does not cause conflicts in the future. In designing the roadmap, the government needs to involve relevant stakeholders, such as business entities, local governments and related associations.
The roadmap is expected not only to regulate coal business aspects but also to consider environmental aspects. The abandoned mine lands can be used for installing a solar farm, providing clean energy for the country. Meanwhile, the coal power plant is encouraged to use clean coal technology (CCT). CCT includes carbon capture storage (CCS), ultra-supercritical, and advanced ultra-supercritical technologies, reducing emissions from the coal power plant.
*Luky Yusgiantoro, Ph.D. A governing board member of The Purnomo Yusgiantoro Center (PYC).
Engaging the ‘Climate’ Generation in Global Energy Transition
Renewable energy is at the heart of global efforts to secure a sustainable future. Partnering with young people to amplify calls for the global energy transition is an essential part of this endeavour, as they represent a major driver of development, social change, economic growth, innovation and environmental protection. In recent years, young people have become increasingly involved in shaping the sustainable development discourse, and have a key role to play in propelling climate change mitigation efforts within their respective communities.
Therefore, how might we best engage this new generation of climate champions to accentuate their role in the ongoing energy transition? In short, engagement begins with information and awareness. Young people must be exposed to the growing body of knowledge and perspectives on renewable energy technologies and be encouraged to engage in peer-to-peer exchanges on the subject via new platforms.
To this end, IRENA convened the first IRENA Youth Forum in Abu Dhabi in January 2020, bringing together young people from more than 35 countries to discuss their role in accelerating the global energy transformation. The Forum allowed participants to take part in a truly global conversation, exchanging views with each other as well as with renewable energy experts and representatives from governments around the world, the private sector and the international community.
Similarly, the IRENA Youth Talk webinar, organised in collaboration with the SDG 7 Youth Constituency of the UN Major Group for Children and Youth, presented the views of youth leaders, to identify how young people can further the promotion of renewables through entrepreneurship that accelerates the energy transition.
For example, Joachim Tamaro’s experience in Kenya was shared in the Youth Talk, illustrating how effective young entrepreneurs can be as agents of change in their communities. He is currently working on the East Africa Geo-Aquacultural Development Project – a venture that envisages the use of solar energy to power refrigeration in rural areas that rely on fishing for their livelihoods. The project will also use geothermal-based steam for hatchery, production, processing, storage, preparation and cooking processes.
It is time for governments, international organisations and other relevant stakeholders to engage with young people like Joachim and integrate their contributions into the broader plan to accelerate the energy transition, address climate change and achieve the UN Sustainable Development Agenda.
Business incubators, entrepreneurship accelerators and innovation programmes can empower young people to take their initiatives further. They can give young innovators and entrepreneurs opportunities to showcase and implement their ideas and contribute to their communities’ economic and sustainable development. At the same time, they also allow them to benefit from technical training, mentorship and financing opportunities.
Governments must also engage young people by reflecting their views and perspectives when developing policies that aim to secure a sustainable energy future, not least because it is the youth of today who will be the leaders of tomorrow.
The Urgency of Strategic Petroleum Reserve (SPR) for Indonesia’s Energy Security
Authors:Akhmad Hanan and Dr. Luky Yusgiantoro*
Indonesia is located in the Pacific Ring of Fire, which has great potential for natural disasters. These disasters have caused damage to energy infrastructure and casualties. Natural disasters usually cut the energy supply chain in an area, causing a shortage of fuel supply and power outages.
Besides natural disasters, energy crisis events occur mainly due to the disruption of energy supplies. This is because of the disconnection of energy facilities and infrastructure by natural disasters, criminal and terrorist acts, escalation in regional politics, rising oil prices, and others. With strategic national energy reserves, particularly strategic petroleum reserves (SPR), Indonesia can survive the energy crisis if it has.
Until now, Indonesia does not have an SPR. Meanwhile, fuel stocks owned by business entities such as PT Pertamina (Persero) are only categorized as operational reserves. The existing fuel stock can only guarantee 20 days of continuity. Whereas in theory, a country has secured energy security if it has a guaranteed energy supply with affordable energy prices, easy access for the people, and environmentally friendly. With current conditions, Indonesia still does not have guaranteed energy security.
Indonesian Law mandates that to ensure national energy security, the government is obliged to provide national energy reserves. This reserve can be used at any time for conditions of crisis and national energy emergencies. It has been 13 years since the energy law was issued, Indonesia does not yet have an SPR.
Lessons from other countries
Many countries in the world have SPR, and its function is to store crude oil and or fuel oil. SPR is built by many developed countries, especially countries that are members of the International Energy Agency (IEA). The IEA was formed due to the disruption of oil supply in the 1970s. To avoid the same thing happening again, the IEA has made a strategic decision by obliging member countries to keep in the SPR for 90 days.
As one of the member countries, the US has the largest SPR in the world. Its storage capacity reaches a maximum of 714 million barrels (estimated to equal 115 days of imports) to mitigate the impact of disruption in the supply of petroleum products and implement US obligations under the international energy program. The US’ SPR is under the control of the US Department of Energy and is stored in large underground salt caves at four locations along the Gulf of Mexico coastline.
Besides the US, Japan also has the SPR. Japan’s SPR capacity is 527 million barrels (estimated to equal 141 days of imports). SPR Japan priority is used for disaster conditions. For example, in 2011, when the nuclear reactor leak occurred at the Fukushima nuclear power plant due to the Tsunami, Japan must find an energy alternative. Consequently, Japan must replace them with fossil fuel power plants, mainly gas and oil stored in SPR.
China, Thailand, and India also have their own SPR. China has an SPR capacity of 400-900 million barrels, Thailand 27.6 million barrels, and India 37.4 million barrels. Singapore does not have an SPR. However, Singapore has operational reserve in the form of fuel stock for up to 90 days which is longer than Indonesia.
Indonesia really needs SPR
The biggest obstacles of developing SPR in Indonesia are budget availability, location selection, and the absence of any derivative regulations from the law. Under the law, no agency has been appointed and responsible for building and managing SPR. Also, government technical regulations regarding the existence and management of SPR in Indonesia is important.
The required SPR capacity in Indonesia can be estimated by calculating the daily consumption from the previous year. For 2019, the national average daily consumption of fuel is 2.6 million kiloliters per day. With the estimation of 90 days of imports, Indonesia’s SPR capacity must at least be more than 100 million barrels to be used in emergencies situations.
For selecting SPR locations, priority can be given to areas that have safe geological structures. East Kalimantan is suitable to be studied as an SPR placement area. It is also geologically safe from disasters and is also located in the middle of Indonesia. East Kalimantan has the Balikpapan oil refinery with the capacity of 260,000 BPD for SPR stock. For SPR funding solution, can use the state budget with a long-term program and designation as a national strategic project.
Another short-term solution for SPR is to use or lease existing oil tankers around the world that are not being used. Should the development of SPR be approved by the government, then the international shipping companies may be able to contribute to its development.
China currently dominates oil tanker shipping in the world, Indonesia can work with China to lease and become Indonesia’s SPR. Actually, this is a good opportunity at the time of the COVID-19 pandemic because oil prices are falling. It would be great if Indonesia could charter some oil tankers and buy fuel to use as SPR. This solution was very interesting while the government prepared long-term planning for the SPR facility. In this way, Indonesia’s energy security will be more secure.
*Dr. Luky Yusgiantoro, governing board member of The Purnomo Yusgiantoro Center (PYC).
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