Prabowo wants to increase Indonesia's energy independence through biofuels and oil and gas reforms

Officials have stated that Indonesia's new Government aims to revitalize oil and gas production. They plan to reduce regulations, reactivate inactive wells, and increase output in producing assets to reverse a decades-long drop in output.

The new president, Prabowo Subianto, took his oath on Sunday. He also plans to continue the efforts of the previous administration to exploit the massive gas finds in South Andaman, and to increase the use of biofuels.

Indonesia, a former member of the Organization of the Petroleum Exporting Countries(OPEC), has seen its oil production fall to less than 600,000. barrels per day this year. This is down from a peak of 1.6 million bpd during the 1990s. The decline was due to the ageing of blocks and a lack of investment.

Oil consumption in the fourth most populous country in the world has doubled in the last decade, to 1.5 million barrels per day. This has led to an average annual import of $28 billion in oil and fuel.

In his inaugural speech, Prabowo cited the rising geopolitical tensions as a reason for why "we must have energy independence and we are capable of being self-sufficient."

While Prabowo and his predecessors both sought to reverse the decline in production, investments have been hindered due to red tape as well as competition from renewables for funding.

Indonesia announced huge gas discoveries in the last few years and is eager to accelerate its development to take advantage rising LNG (liquefied Natural Gas) demand both locally and abroad.

On Oct. 14, Prabowo’s energy minister Bahlil Lahadalia said, "We will remove the various regulations that impede the exploration process. We will reduce the number of permits from 320 to 140, and then we will further cut them to shorten the procedure."

Energy analyst Komaidi Notonegoro at ReforMiner Institute said that exploration and production contractors have to deal with 19 agencies, many of which are rivals, in order to obtain permits.

He said that oil and gas contractors would be better off focusing on finding new reserves than chasing permits. It takes too long.

REACTIVATING IDLE WELLS

Bahlil stated that the new government will push to reactivate nearly 5,000 inactive wells.

Bahlil stated last week that the goal was to increase oil production around 200,000 barrels per day by optimizing idle wells and using technology. He did not specify a timeframe.

The government also wants to see more projects that use so-called enhanced recovery of oil (EOR) in order to extract oil from old wells, which requires additional costs. ExxonMobil Corp. and the state-owned oil company Pertamina have separate EOR projects in the early stages.

"The government is primarily concerned with volume, but the contractors are running businesses." Komaidi asked if the government would be willing to compensate for the increased cost.

Bahlil stated that the new government wants to reduce the imports of liquefied petrol gas (LPG). The current production is 1.7 million tonnes per year. Indonesia imports about 70% of its 8 million tons LPG consumption annually.

Prabowo has also set ambitious goals to increase the use of biodiesel, bioethanol and other energy sources.

"We must be realistic." Fahmy Radhi, from Gadjah Mada University, said that Prabowo cannot rely on gas and oil anymore. It is best that he puts renewable energy at the top of his priority list and focuses on it from day one.

Prabowo has announced plans to increase palm oil's share in diesel fuel to 50% from the current 35%. He also listed corn and cassava as possible biofuel feedstocks on Sunday. (Reporting and editing by Florence Tan, Raju Gopalakrishnan).

(source: Reuters)