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Pertamina Predicts Indonesia will Run Out of Oil Reserves by 2030

6 March 2019

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Indonesia

TEMPO.CO, Jakarta – Pertamina Unit Manager Communication & CSR MOR I, Roby Hervindo predicts Indonesia will run out of oil reserve by the year 2030 based on the country’s current 3.3 billion barrels reserve.

“Meanwhile, our fuel consumption continues to rise to 1.6 million barrels each day. North Sumatra alone, the fuel consumption in 2018 increased 3.5 percent compared to 2017,” said Roby in a written statement on Wednesday, March 6.

Roby argues that efficient energy consumption is needed to conserve Indonesia’s energy sources over rational and efficient use of energy.

“Through this event, we hope that it will spark the awareness to conserve energy. Surely without reducing energy uses that are truly needed,” said Roby.

Pertamina Marketing Operation Region (MOR) I in conjunction with North Sumatra University (USU) Mechanical Engineering Faculty held a seminar on energy conservation within the oil and gas industry.

Several attempts on conservation, Pertamina replaced the use of Refrigerant R-22 with Musicool, which is more environmentally friendly which produced savings up to Rp890 million at the MOR I. The state-run energy company also applied micro-hydro technology that managed to produce 1,095 kWh every six months.

MUHAMMAD HENDARTYO

Coal

Coal-fired power set to grow to meet Vietnam’s needs

6 March 2019

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Vietnam

HÀ NỘI – Though the Government plans to increase its renewable energy capacity, Việt Nam’s power industry is forecast to see a rise in coal-powered generation as the cheap and reliable source remains the most feasible option to meet the country’s rapidly rising power demands.

According to Daine Loh, power and renewables analyst of Fitch Group’s Fitch Solutions Macro Research, Việt Nam’s coal-powered generation growth is expected to increase rapidly over the next decade and dominate the country’s power sector expansion.

“While the Government also intends to increase LNG imports and non-hydro renewable energy generation capacity, coal would remain the more attractive option over the next decade as it is cheaper and more reliable at present. As such, we forecast that coal generation will reach 50.5 per cent of the total consumption power mix by 2028, with gas at 22.5 per cent, hydropower at 22.8 per cent and non-hydro renewables at 3.8 per cent,” Loh told Việt Nam News.

“This is due to relatively slow supply growth from traditional sources of energy such as hydropower and natural gas, with the Government set to turn to coal to meet the surge in demand for power,” he explained.

According to Loh, traditionally, Viet Nam has relied on hydropower and natural gas for its power generation, but there are several obstacles to see continued growth in these two sectors.

Firstly, hydropower potential has already been almost fully exploited at present. Furthermore, recent droughts and decreasing water supplies highlight the threats facing Viet Nam’s hydropower generation output reliability.

Secondly, domestic gas reserves are depleting and will not sustain a substantial ramp-up in gas power generation over the longer term, Loh said.

“As a result, we expect the Government to turn largely to coal power to meet Viet Nam’s increasing power demand, which stems in particular from an expanding industry and manufacturing sector, in order to support continued economic growth. Rapid urbanisation and Government efforts to up electrification levels to 100 per cent will further boost electricity consumption growth rates.”

Sharing the view, Trần Viết Ngãi, chairman of the Vietnam Energy Association, told Việt Nam News that coal-fired power would still play a key role in the country’s electricity industry next year.

“The ratio of coal-fired power will increase from the current 39 per cent to some 60 per cent,” he forecast.

Dr Nguyễn Cảnh Nam from the Vietnam Energy Association said with Vietnamese economic conditions, coal-fired power is still a good option.

“Considering the country’s domestic coal resources, the ability to import coal and the level of greenhouse gas emissions, it is necessary to develop coal-fired power because of its technical and economic feasibility,” Nam told Việt Nam News, explaining while renewable energy from solar and wind is more costly, it can’t ensure consistent power.

“The ratio of Viet Nam’s coal-fired power is 39.1 per cent, the same as the global average. The rate is much higher in many other countries, such as 63 per cent in China, 61 per cent in Australia, 46 per cent in South Korea, 78 per cent in Poland and 87 per cent in South Africa,” Nam said, adding that coal-fired power output per capita in Viet Nam is also 793 kWh, much lower than the world’s average level of 1,290 kWh.

Tech needed

However, Nam said the development of coal-fired power must be cleaner to increase efficiency and reduce emissions through the use of more modern technologies.

Besides coal-fired power, Nam also noted the need to accelerate the development of electricity from other resources, especially renewable ones.

“For more sustained development, it is very important to change the country’s economic structure with an aim to reduce the share of power-intensive industries,” he stressed.

“In doing so, the demand for electricity decreases, which will reduce the pressure on the electricity supply. At that time, we can make long-term investments for clean and renewable energy,” Nam said.

Loh also warned that, over the longer term, there are downsides to coal-fired power growth due to increasing environmental concerns and rising coal prices.

“The Commodities Team of Fitch Solutions expects coal prices to increase due to a market deficit for coal over the next five years as global demand will exceed global supply,” he noted.

As a net coal importer since 2015, the rising cost of coal coupled with Viet Nam’s increasing dependence on coal imports will increase electricity generation costs. In the last few years, State-owned Vietnam Electricity (EVN) had been reporting losses due to electricity tariffs for coal-fired power – which are set by the government – having been too low to absorb the increasing costs of coal power generation.

Increasing concerns over pollution have led to a general pushback against coal. While Viet Nam has committed to reducing carbon emissions, there are limited practical alternatives for the government to meet the surge in power demand at present. In a scenario where the cost of alternative sources of power generation are comparable to that of coal power, Loh believes there would be a shift in government strategy that would seek to curb coal power growth and focus on alternatives.

However, a substantial shift in the Government’s strategy is likely to occur only beyond the next decade as Viet Nam is only just starting to develop its grid infrastructure to facilitate renewable energy and building its first LNG terminal to increase natural gas imports, according to Loh. – VNS

Coal

Miners call for more government support amid rising problems

5 March 2019

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Indonesia

A group of top executives of foreign and local mining firms gathered at a forum held in a five-star hotel at the heart of Jakarta recently, expressing their wishes that the government should do more to help their industry as several problems were left unsolved.

Deputy Energy and Mineral Resources Minister Arcandra Tahar gave an opening speech at the forum, saying that he was open for comments about any problems.

However, the CEOs only conveyed their comments after Arcandra left the building.

They mentioned three main hurdles in the mining industry right now: a lack of government attention to mining exploration, regulatory uncertainty and unfair fiscal treatment in terms of royalties for their commodities.

Each year, the government earmarks state funding for mining exploration in the budget of the Energy and Mineral Resources Ministry’s Geology Agency.

However, data from the Indonesian Geologists Association (IAGI) show that the country saw a drop in the amount of overall expenditure for exploration of mineral commodities, such as gold and copper. The number was recorded at US$113 million in 2015, far lower than $497 million in 2012.

“We don’t have a big budget [for exploration from the government] […] we have to start discussing with the government to ask for an increase, not only rely on the company [budget],” said Frans Kesuma, president director of local mining contractor firm PT Pama Persada.

Coal is loaded into a haul truck at a coal mine in South Sumatra. (Shutterstock/Manggarr)

Frans suggested that mining companies immediately discuss the issue with the government as relying mainly on the private sector for exploration was not sustainable, especially when a downturn hit the industry.

“If we only rely on [better] commodity prices [to pay for exploration activities], the budget surely will increase when the prices rise, but when the prices are down, the budget will automatically decrease as well,” he said.

Boosting exploration in the mining sector is important to ensure adequate reserves in the future. Government data show that Indonesia’s coal reserves, which stood at 26.2 billion tons as of March 2018, will deplete in about 50 years from now, assuming there is no new discovery of a reservoir.

Coal is expected to be the main energy source for Indonesia for over 30 years from now as the commodity will still be contributing more than 20 percent to the national energy mix.

Beyond coal, Indonesia still has big untapped resources of other minerals, such as nickel ore laterite, which will be an integral part in batteries for electric vehicles. The country had around 6.5 billion tons of reserves of the commodity in 2017.

Ratih Amri, executive director of mining think tank Mineral and Mining Industry Institute (MMII), acknowledged that research and development (R&D) was important for exploration activities, saying that the government was preparing an incentive to support that.

“I heard that there is a [proposed] presidential regulation on incentives for vocational training and R&D activities. And it could be followed with a ministerial regulation, like tax deductions for any money you [private mining companies] spend on R&D,” she told the audience at the forum.

MMII is working under state mining holding company PT Indonesia Asahan Aluminium (Inalum), which officially became a major shareholder of gold and copper miner Freeport Indonesia in December 2018.

Heavy equipment and trucks pass through a coal mine in East Kalimantan. (Antara/Wahyu Putro A)

Exploration activities in mining remained few compared to other energy sectors, such as oil and gas, due to a number of problems and high level of complexity, said Fahmy Radhi, an energy and economic observer at Gadjah Mada University.

“There are three key barriers that still hamper investment for exploration in the mining sector, namely declining mining resources, regulatory hassle and resistance from environmentalists,” he told The Jakarta Post recently on a separate occasion.

The government said earlier this year that the investment target for the mineral and coal sector for 2019 was around $6 billion, relatively flat compared to a year earlier. It will also highly depend on the success of mining auctions, which will involve at least 14 mining sites.

Regarding the issue of regulatory uncertainty, executives of mining companies said they often had to deal with problems surrounding forestry-related permits.

Publicly listed miner Bumi Resources Minerals, for example, has always struggled when dealing with forestry-related permits. Its director Suseno Kramadibrata likened the process to struggles of “blood, sweat and tears”.

Workers monitor a mining area of nickel producer PT Vale Indonesia. (KONTAN/Cheppy A Muchlis)

As for fiscal treatment, Vale Indonesia president director Nicolas Kanter criticized the structure of royalties paid by his company for processed nickel and nickel ore. He argued that nickel miners such as his company were not treated fairly, and that the policy betrayed the government’s mission to develop the downstream industry in the mineral sector.

Nicolas hinted that setting a lower royalty rate for nickel ores compared to processed ones would not help create added value for the commodity.

Government Regulation No. 9/2012 on types and tariffs for non-tax revenues under the Energy and Mineral Resources Ministry stipulates that each sale of nickel ore per ton is subject to 5 percent in royalties.

Each ton of processed nickel, namely nickel matte and ferro nickel, is subject to 4 percent in royalties from each sale, only 1 percent lower than the rate for ores or unprocessed nickels.

After a previous renegotiation with the government, Vale Indonesia is required to pay 2 percent in royalties.

“Based on the negotiation [with the government], we only pay 2 percent [for processed nickels], while for the ores, we pay 5 percent. So, does our country really encourage the [creation] of value-added [products]?”

Another blow for processed nickel occurred in 2017, when the government decided to scrap the ban on ore exports, including nickel ore. The ban was previously implemented to protect the products of mineral downstream industries.

Renewables

SOLAR TECH, NANGUNGUNA: MREN begins construction of 1.1 MW solar rooftop

5 March 2019

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Philippines

The renewable energy arm of MRC Allied Inc. broke ground on its 1.1-MW solar photovoltaic project in one of the major malls in the region.

MREN had signed a memorandum of agreement for development, design, project, and installation of the project, which is their pilot project for its solar PV program.

“MREN will be the project developer and owner of the solar facility while a private entity, owning and operating the mall, will be the power off-taker,” as stated under the MOA.

As stated in the MOA, around P67.4 million will be allotted for a 20-year cooperation period of the parties, beginning from the issuance of the acceptance certificate.

MRC Allied is originally a property company before it joined various industries such as renewable energy.

The firm aims to have a 200-MW capacity in the next two years.

Oil & Gas

Oil prices swing high and low; biodiesel blend up

5 March 2019

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Philippines

The country’s oil firms cut pump prices by as much as P0.35 per liter for kerosene and P0.10 per liter for diesel but raised the price of gasoline by P0.10 per liter effective 6am Tuesday to reflect the movement of world oil prices. “Demand from China and Japan weakened. Activities of Chinese factories declined, followed by the second biggest economy in Asia, which is Japan. America has ample supply and there is also an impact from the slowdown of India activity,” Energy Undersecretary Felix William Fuentebella said. Pilipinas Shell Petroleum Corp., PTT Philippines, PetroGazz Philippines and Eastern Petroleum Corp. implement the price adjustment while other oil firms are expected to follow. The oil firms implement price adjustments every Tuesday. Year-to-date adjustments now stand at P3.75 per liter for gasoline, P4.35 pe rliter for diesel and P2.70 per liter for kerosene, according to the latest monitoring report of the Department of Energy. Fuentebella, meanwhile, said the DOE will still study the proposal of the Agriculture Department to increase the biodiesel blend from two percent coco-methyl ester to 5 percent CME blend in diesel. “We will listen first kung ano proposal of DA the increase ng biodiesel because at the end of the day, it’s full appreciation is comprehensive analysis. If we sit down together, we will look at the price and the effect on the environment at entire economy,” he said. Senator Sherwin Gatchalian, for its part, is urging the DOE and the National Biofuels Board to thoroughly study the proposal of the DA, particularly its impact on the pump price of diesel. Agriculture Secretary Emmanuel Piñol announced that he would lobby for the increase of biofuel content in diesel from B2 to B5 to absorb oversupply in the copra industry. Gatchalian, chairman of Senate Committee on Energy said the lawmaker pointed out that is paramount for the NBB, an advisory body to the DOE, to study whether an increase to five percent blend is warranted and whether the local production of feedstock is sufficient to meet present and future demand.

“The DOE and NBB should weigh the impact of increasing the biofuel content from B2 to B5, especially with the recent implementation of the new round of increases in the excise tax on fuel in January. After all, the law requires the recommendation of the NBB before the DOE decides to increase the blend,” Gatchalian said. Citing the study his office conducted, Gatchalian estimated that increasing the biofuel content in diesel from B2 to B5 may result in a 7.5-percent increase, equivalent to ₱2.86, in the pump price of biodiesel. Gatchalian pointed out that an ordinary jeepney driver, who consumes around 15 liters of diesel per day, might need to tighten his belt further since he will be expected to shell out an additional ₱1,286.30 per month if the blend is increased; an amount Gatchalian said could instead be used to buy a half sack of rice or additional groceries. The lawmaker recalled that during the last Joint Congressional Oversight Committee on Biofuels hearing, there had been concerns of lack of feedstock, which he said prevented the DOE from mandating the increase from the current two percent blend. Data from the DOE shows that for biodiesel, the annual capacity in 2017 was 574.9 million liters but production was only at 39 percent of capacity. Gatchalian said the Joint Congressional Oversight Committee is set to conduct a hearing on DA’s proposal to increase the biodiesel blend in the fuel market from 2 percent to 5 percent to cushion the falling prices of copra. “I hope that we can agree on action steps in order to move the industry forward and attain the goal of energy security and environmental sustainability as envisioned by the authors of the Biofuels Act,” the lawmaker said.

Oil & Gas

Pertamina aims to drill 300 wells this year

5 March 2019

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Indonesia

State-owned energy holding company Pertamina aims to drill 300 wells this year in a bid to jack up its oil and gas production to an average of 928,000 barrels of oil equivalent per day (boepd).

The company plans to drill 120 wells in its newly acquired Mahakam Block in East Kalimantan, on which production has been declining, Pertamina upstream director Dharmawan Samsu told the press in Jakarta on Monday.

“There isn’t another way [to increase production] except to conduct aggressive drilling,” Dharmawan said, adding that about 40 wells would be created in the Sanga-Sanga Block.

Pertamina, which is represented by its subsidiary Pertamina Hulu Sanga-Sanga (PHSS), took over the block on Aug. 8 from a United States oil and gas firm, the Virginia Indonesia Company (VICO), which had operated the block for more than four decades.

Oil exploration is crucial as Indonesia only has proven oil reserves of about 3.2 billion barrels, 0.2 percent of the world’s proven reserves.

Indonesia has been an oil importer since at least 2004 and currently the country consumes about 1.5 million barrels of oil, half of which is produced domestically.

Dharmawan said the target of 928,000 boepd would be hit mainly through its gas production, which is aimed to be 514,000 boepd.

Apart from drilling, Pertamina also plans to boost the production of existing wells through enhanced oil recovery (EOR) by pumping water, carbon dioxide, or other chemical substances, Dharmawan said, adding that the company also planned to acquire mature oil and gas fields in other countries.

“In other countries, we are not interested in exploration blocks, but we only seek mature assets.” he said. (bbn)

Energy Cooperation

Indonesia, US, and Japan conduct trilateral workshop on LNG

5 March 2019

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Jakarta (ANTARA News) – The US and Japanese Embassies in Jakarta collaborated with Indonesian Energy and Mineral Resources Ministry to conduct the first trilateral workshop on Liquefied Natural Gas (LNG) to promote energy partnerships in a free, open Indo-Pacific.

The trilateral workshop on LNG was held in Jakarta on Tuesday and opened by President Director of the Japan External Trade of Organization Keishi Suzuki along with Deputy Chief of Mission of the US Embassy in Jakarta Heather Variava and Charg? d`Affaires of the Japanese Embassy in Jakarta Keichi Ono.

Through the workshop, the United States and Japan are committed to assisting Indonesia in developing LNG by promoting US and Japanese companies, as the main providers of LNG infrastructure and finance in Indonesia.

Hence, the workshop discussed several proposals regarding LNG business opportunities in Indonesia, the problems being faced and the necessary supporting measures to enhance cooperation between Japan and the United States to be implemented within the framework of assistance between the Japanese and US governments.

In addition, the workshop aims to provide opportunities for Japanese, US, and Indonesian companies to meet and expand networking among them.

Nowadays, gas has taken on an important role in Indonesia`s energy mix. The country aims to reach an aspirational target of 22 percent gas in the energy mix by 2025 and 24 percent by 2050. This target has been stipulated in the national energy policy, according to Head of Special Task Force from the Upstream Oil and Gas Business Activities (SKK Migas) Dwi Soetjipto.

“The Government of Indonesia has put in its best efforts to provide energy security through appropriate energy policy by providing a guarantee of the four elements of availability, accessibility, affordability, and sustainability in the country,” Soetjipto noted.

He remarked that in terms of gas, the Government of Indonesia has stipulated current gas regulations in the procedure of allocation, utilization, and pricing.

Since 1977, Indonesia has been a significant player in the world gas business. In the 90s, Indonesia was the biggest LNG exporter globally, with an almost 40 percent share of the LNG exports. In fact, Indonesia was still among the top five LNG exporters in 2017, while Indonesia`s top LNG consumers by share respectively being Japan, Korea, Taiwan, China, and the United States.

The Asia-Pacific holds 9.4 percent of the world`s gas reserves wherein China holds 2.9 percent and Indonesia holds 1.53 percent of the world`s gas reserves.

Renewables

Thailand plans world’s biggest floating solar farms to drive green push

5 March 2019

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Thailand

BANGKOK (BLOOMBERG) – Thailand plans to build the world’s largest floating solar farms to power South-east Asia’s second-largest economy and to boost the country’s share of clean energy.

State-run Electricity Generating Authority of Thailand (EGAT) will float 16 solar farms with a combined capacity of more than 2.7 gigawatts on nine of its hydroelectric dam reservoirs by 2037, said Mr Thepparat Theppitak, a deputy governor with the utility. Several of the proposed projects are more than double the size of the world’s largest floating system now and the venture dwarfs the 1.3 gigawatts of generation installed globally as of October.

The plan represents an ambitious bet for Thailand on floating solar, which tends to be more expensive than the ground-mounted units that dominate the sector. If EGAT builds all its proposed projects, the company says floating solar will account for one tenth of the country’s clean energy sources, compared to just 1 per cent of global solar capacity by 2050, according to BloombergNEF.

“As the cost of solar equipment comes down, many developers are looking at water with grid connection,” said Ms Jenny Chase, head of solar analysis for BloombergNEF in London. “This seems to be a great combination of long-term and well-structured planning, with individual projects identified already.”

Locating the plants at existing hydropower reservoirs means the utility won’t need to spend as much on infrastructure tying it into the grid and the system will improve the overall output of the hydropower plants, according to Mr Thepparat. In the future, the company will also use lithium-ion batteries to store electricity produced by the floating plants.

Thailand has been moving towards generating more electricity from renewable sources in recent years. It has set the goal that renewable energy will make up 27 per cent of overall capacity by 2037, according to its latest power development plan.

The bidding for the first floating solar project will begin in two months and will be open to international companies, Mr Thepparat said, with the budget set at two billion baht (S$85 million) for a 45 megawatt (MW) farm at Sirindhorn Dam in north-east Thailand. That plant is expected to come online next year.

Floating systems are considered about 18 per cent more expensive than land-based ones because of the need for floats, moorings and more resilient electrical components, according to the World Bank. However, the projects bypass land use in forests and farmlands, and water can also help to cool the solar panels, increasing the efficiency by 10 per cent, Mr Thepparat said.

Eight of EGAT’s 16 planned floating plants would be larger than what is now the world’s biggest, a 150-MW system floating above a collapsed coal mine in China. Thailand’s biggest will be the 325-MW farm at Sirikit Dam in northern Thailand, scheduled to be completed in 2035.

“The hydro and solar power will be working in synergy in this project and using our existing assets and resources,” Mr Thepparat said in an interview on Monday (March 4) at EGAT’s head office near Bangkok. “We have studied and planned this project very carefully.”

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