3 initiatives to move Indonesia’s gas projects forward

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Lenita Tobing, Partner, PwC Consulting Indonesia
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This is the second installment of the 2-part interview with Lenita Tobing, Partner at PwC Indonesia. Read part one on "PwC analyses the most critical changes and developments in Indonesia’s gas market."

Speaking at the 2nd edition of the Gas Indonesia Summit & Exhibition, Ms Tobing spoke with Gastech Insights about upcoming Government incentives for Indonesian gas and LNG projects and the importance of natural gas in the country.

Gastech Insights: What key incentives have been proposed to develop Indonesia’s gas and LNG projects?

Lenita Tobing: In 2017, the Indonesian Government has issued several regulations as incentives for gas and LNG development – key highlights from these regulations are:

Peraturan Menteri ESDM 08/2017

  • Improved production sharing contract (PSC), shifting from cost recovery scheme to a gross split scheme
  • Base split for gas is 48% for contractor and 52% for government
  • Split for contractor can be increased by up to 5% if the gas project is not economically feasible

Peraturan Menteri ESDM 25/2017

  • Gas-for-transportation development roadmap
  • Gas-for-transportation distribution is freed from toll fee
  • Government-related entities that are related to oil & gas business are required to use gas for their operational vehicle's fuel
  • Gasoline pump owner has to provide at least 1 gas-for-transportation dispenser

Peraturan Menteri ESDM 29/2017

  • Simplification of oil & gas investment permits from 104 permits to 6 permits

There have also been more efforts to launch several key government initiatives including distribution of free CNG converter kits to 1,000 private cars, fuel conversion for Jakarta Public Transportation and support to new LNG investment. This will indirectly provide incentives for investments in gas and LNG projects as demand and usage of gas in Indonesia increases.

Gastech Insights: How important is natural gas in strengthening Indonesia’s energy security in the future?

Lenita Tobing: Natural gas is crucial in strengthening Indonesia’s energy security in the future, mainly due to the increasing importance of gas in the power industry. In PLN’s 2016 – 2025 RUPTL, gas is expected to be the second largest source of energy at 29% of the Energy Mix, just behind coal at 50%. Currently, gas power plants already account for about ~25% of electricity production in Indonesia.

There have also been a strong effort from the Indonesian Government to push gas-for-transportation initiatives. Transportation methods such as Bajaj and Transjakarta have started using gas as fuel and there is a government agenda to use gas for vessels, specifically LNG.

As Indonesia moves toward the clean energy movement, the dependence on gas as an energy source will continue to grow.

Gastech Insights: What are you most looking forward to at the upcoming Gas Indonesia Summit next week?

Lenita Tobing: I am looking forward to the open and honest discussions between the key stakeholders: Government (Ministry of Energy, Ministry of Industry, Ministry of SOE), Regulators, SOEs – especially PLN – and the private sector which will lead to practical outcomes for our gas national strategy going forward as well alignment of those stakeholders to execute the strategy.

To read the first part of this interview with Lenita Tobing about the critical changes and developments in Indonesia's gas market, click here.

Share your insights and join the conversation: Do you believe the new Government incentives will dramatically develop the gas and LNG industry in Indonesia? Leave your comments below.

Lenita Tobing is speaking on 12th July at the Gas Indonesia Summit & Exhibition at Jakarta Convention Center on "Developing LNG Infrastructure in Indonesia - Investment Opportunities". To see the full conference programme and to learn more about the upcoming event, click here.