Oil and gas remain crucial to Indonesia


Key sector: Fuel storage tanks at a PT Pertamina facility in Jakarta. The government is devising a strategy containing several goals to maintain its growth. — Bloomberg

JAKARTA: The oil and gas sector will remain one of the key growth drivers for Indonesia in years to come despite a steady global shift to renewable energy, a minister has said.

Energy Minister Arifin Tasrif said the government was currently devising the National Grand Energy Strategy containing several goals, including increasing oil and gas production and reducing carbon emissions.

“A measured transition process is necessary, and the oil and gas sector remains of strategic importance in this transition,” he said during the Indonesian Petroleum Association Convention and Exhibition.

The government aims to reduce oil imports through various measures, including greater reliance on the country’s abundant natural gas resources for domestic use and pushing electric vehicle (EV) adoption.

The upstream oil and gas industry drove the national economy and encouraged the emergence of other economic activity, Arifin claimed. As of July, the oil and gas sector contributed most to non-tax state revenue (PNBP) at 47.58 trillion rupiah (US$3.3bil or RM14bil), 57.22% of the total 83.14 trillion rupiah (RM24bil) PNBP from the energy and mineral resources sector.

Putra Adhiguna of the Institute for Energy Economics and Financial Analysis said the strategic role of the domestic oil industry was primarily to alleviate the country’s dependence on imports to satisfy domestic fuel consumption.

However, noting that the rise of EVs meant the electricity sector was intertwined with the transportation sector, the government should include EV adoption in discussions regarding the oil industry.

A balanced approach should remain grounded in market realities, according to Putra.

“Without changing the oil demand pattern, demand growth will likely continue to outpace production,” he told The Jakarta Post.

Meanwhile, Institute for Essential Services Reform (IESR) executive director Fabby Tumiwa said oil and gas demand would stay high as the transition to EVs took time.

EV utilisation in Indonesia, according to the IESR, is projected to reach only 40% by 2050.

Should there be no transition away from fuel oil (BBM), such as through the use of hydrogen, BBM demand would still be high in 2050.

Thus, the government needed to explore synthetic fuel development to replace BBM, Fabby said.

“The energy transition strategy must challenge conventional thinking,” he said.

For example, Fabby suggested, the government should imagine that, in the 2045-2050 period, Indonesia’s energy supply would come entirely from renewable sources to push for an energy-system transformation. — The Jakarta Post/ANN

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