Jakarta, IndonesiaSentinel.com — Indonesia is on the brink of a golden opportunity following the discovery of massive natural gas reserves that could significantly boost the nation’s energy landscape. This newfound wealth demands strategic policies to ensure optimal domestic utilization, particularly given the crucial role of natural gas in the country’s transition towards Net Zero Emissions (NZE).
International energy research firm Rystad Energy recently announced the discovery of substantial gas resources at South Andaman in Aceh and Geng North in East Kalimantan. These discoveries place Indonesia at the forefront of Southeast Asia’s natural gas reserves, holding nearly half of the region’s total.
Sofwan Hadi, Country Head for Indonesia at Rystad Energy, emphasized that these discoveries position Indonesia as a highly attractive destination for global investors.
“The opportunity is here, the potential is immense, but the priority must be ensuring that these projects move forward effectively to attract and secure global investment,” Sofwan said on Wednesday, August 21, 2024.
One of the urgent needs is to establish the right fiscal policies, including incentives and tax regimes, to ensure the economic viability of future oil and gas projects. This could include offering more flexibility to Production Sharing Contract (PSC) holders, whether through the gross split or the traditional cost recovery model.
“Additionally, time-based incentives could also accelerate the monetization of these projects,” Sofwan added.
Sofwan further stressed the importance of setting domestic gas prices and developing the necessary infrastructure to ensure efficient gas distribution. If domestic gas prices cannot cover transport or logistical costs, investor interest in project development could diminish.
Separately, Wahyudi Anas, a member of the Regulatory Committee for Downstream Oil and Gas (BPH Migas), emphasized the urgent need for balanced and fair policies in the management of natural gas across the upstream, midstream, and downstream sectors.
“These sectors are interdependent and integrated. None of them can operate successfully in isolation,” Wahyudi stated.
He pointed out the critical triangular relationship within this ecosystem: upstream gas production, the availability of natural gas infrastructure, and the readiness of consumers as the end-users. “Upstream gas production can only be absorbed if there is continuous development of natural gas infrastructure, connecting it to end consumers, whether for household, commercial, or industrial use.”
Wahyudi also stressed that creating a positive investment climate across all sectors of the natural gas industry requires ensuring economic value that meets established standards. “This is essential for the optimal absorption of natural gas while considering the interests of the state and the people,” he said.
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He noted that setting natural gas prices below economic value can be feasible if investors or businesses assigned by the government receive measurable and fair incentives.
According to data from the National Energy General Plan (RUEN) published by the Reforminer Institute, national gas demand is projected to increase from approximately 5,353 MMSCFD in 2023 to 11,339 MMSCFD by 2030, and further to 25,869 MMSCFD by 2050.
RUEN outlines that the share of gas in Indonesia’s energy mix is expected to rise from 22% in 2030 to 24% by 2050. “The utilization of natural gas is already a key element of Indonesia’s policy framework as the nation moves towards clean energy and the implementation of energy transition policies.”
(Agung)
