By George Barber
This is an article that I wrote recently that was published in the Jakarta Post on 31 July 2017.
There can be no doubt about the potential of Indonesia’s Energy Potential, although potential is exactly what it is. There can also be no doubt that there is a lot happening outside of the main energy sectors that are well known, i.e., oil, gas, geothermal, hydropower, some companies are going quietly about their business and trying to develop extremely complicated fields, not so much in the resource aspects, but in the geological and environmental aspects as well as the community and battling away at the regulations.
All resource developments have their own unique challenges, especially resources that are located offshore or in onshore remote parts of this divest archipelago, most people in the resource industry accepts these challenges, these challenges can and must be met head on as part of the stages to reach the end goal, which is delivery of a resource to the end user which is commercially viable as well as ensuring that the local community’s and the county benefits.
There have been three articles published in the Jakarta Post recently that have caught my eye as follows: “Rising fuel imports stifle Pertamina”, “RI lags behind peers in renewable energy”, “ExxonMobil exit warning of waning oil, gas industry”. Surely these three headlines alone say something? Another headline stated, “Geothermal power requires incentives”. There was a publication from the Indonesian Petroleum Association (IPA) for the 41st IPA that indicated that the number of licenses required for oil and gas development had increased from 341 in 2015 to 373 in 2017 with the main increases coming from MEMR 74 (52), Transportation Ministry 76 (58), Navy 9 (2), only 4 ministries/agencies from 19 had decreased their requirements, some remained the same.
We have seen recently several companies’ that have decided enough is enough, company’s such as Marathon, Andarko, Hess and now ExxonMobile, all of these companies and more have worked in what is considered far more difficult countries to develop a business, such as Nigeria which appears to be coming more attractive than Indonesia. Every country has its ups and downs, although in Indonesia we have been seeing a steady decline of the oil & gas industry in Indonesia for many years, we can also argue the same for the mineral resource sector, the geothermal sector is struggling to gain momentum. Why is this when a country has such potential, not just with its abundance of natural resources, but also human resources?
I was making a presentation the other week to an Indonesian oil company where I was asked what is delaying you getting projects in Indonesia, my answer was, “Do you really want to know”, he said yes, I mentioned several points which included acceptance of new technology, regulations, afraid to make decisions, other comments I cannot mention in the media, they returned my reply with agreement and also added a few other comments which were not complimentary to the regulators. It appears that Indonesian companies also have difficulties working in their own country.
Therefore, the question that has to be asked is: does Indonesia want to develop its own resources? We can see in some areas they do, such as wind and tidal power, solar power not so much, in other areas such as oil & gas it appears that the easy way is to import, which appeared to be the scenario given at the opening ceremony of the 41st IPA conference in May, hence the headline “Rising fuel imports stifle Pertamina”.
A recent study by The Habibie – Center said that the region lacks experience and expertise in capital-intensive renewable energy projects; maybe this is true, although you only gain experience by doing. Believe it or not, there are a lot of companies and people that want to help Indonesia, (not all for financial gain only), with the intent of doing business professionally and fairly, which also involves helping to solve the problem of expertise. All projects have to have local content, training must be given and allowed for in the cost of a project, not driving the price down so much that this area is reduced where the first thing that is cut when something goes wrong is training. Indonesia is extremely blessed with human resources, which in my experience, they are very efficient and in many cases can stand side-by-side with s other countries who claim to be experts at everything. So what is the problem, is it regulations?, partly yes, if we look at the intended Production Sharing Contract (PSC), it appears that very few investors and people in the industry are jumping over the moon about this, we all know that industries do not like change, but what is known, if the change is outstanding, the vast majority of industry leaders would accept this as a good idea, which makes one wonder if the PSC is a good idea in its current form, does it need more work on this to make it attractive?
The following statements were made by Pak Arie Rahmadi (BPPT), “Inconsistent regulations combined with long payback periods”; and “we change regulations on renewable energy quite often”. Why are regulations inconsistent and changed quite often? If they are good regulations, they only need fine tuning, not re-writing. Regulations should move with the times, we should not be making regulations for change sake, although this appears to be a worldwide problem with people in power at this time. If it is not broken, why fix it, preventive maintenance is needed only.
A headline in the Jakarta Post 25 July, “The President tells ministers to support business”, this article was prepared before this date. What the President stated is what is being stated in this article He also stated that the gross-spilt scheme lacks incentives, companies have said it does not have clear tax calculations.
Decision makers need to make decisions that are beneficial for the country and the investors, not be afraid to make decisions that may make them unpopular, after all, life is not a beauty contest.
*This article was first published by George Barber and is reprinted here with full permission from the writer.
**About the Writer:
George, Director at PT Indonesia, has lived and worked in South East - Indonesia for the past 24 years, and is presently involved with innovative exploration for natural resources throughout South East Asia.
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In 2021, the makeup of renewables has also changed drastically. Technologies such as solar and wind are no longer novel, as is the idea of blending vegetable oils into road fuels or switching to electric-based vehicles. Such ideas are now entrenched and are not considered enough to shift the world into a carbon neutral future. The new wave of renewables focus on converting by-products from other carbon-intensive industries into usable fuels. Research into such technologies has been pioneered in universities and start-ups over the past two decades, but the impetus of global climate goals is now seeing an incredible amount of money being poured into them as oil & gas giants seek to rebalance their portfolios away from pure hydrocarbons with a goal of balancing their total carbon emissions in aggregate to zero.
Traditionally, the European players have led this drive. Which is unsurprising, since the EU has been the most driven in this acceleration. But even the US giants are following suit. In the past year, Chevron has poured an incredible amount of cash and effort in pioneering renewables. Its motives might be less than altruistic, shareholders across America have been particularly vocal about driving this transformation but the net results will be positive for all.
Chevron’s recent efforts have focused on biomethane, through a partnership with global waste solutions company Brightmark. The joint venture Brightmark RNG Holdings operations focused on convert cow manure to renewable natural gas, which are then converted into fuel for long-haul trucks, the very kind that criss-cross the vast highways of the US delivering goods from coast to coast. Launched in October 2020, the joint venture was extended and expanded in August, now encompassing 38 biomethane plants in seven US states, with first production set to begin later in 2021. The targeting of livestock waste is particularly crucial: methane emissions from farms is the second-largest contributor to climate change emissions globally. The technology to capture methane from manure (as well as landfills and other waste sites) has existed for years, but has only recently been commercialised to convert methane emissions from decomposition to useful products.
This is an arena that another supermajor – BP – has also made a recent significant investment in. BP signed a 15-year agreement with CleanBay Renewables to purchase the latter’s renewable natural gas (RNG) to be mixed and sold into select US state markets. Beginning with California, which has one of the strictest fuel standards in the US and provides incentives under the Low Carbon Fuel Standard to reduce carbon intensity – CleanBay’s RNG is derived not from cows, but from poultry. Chicken manure, feathers and bedding are all converted into RNG using anaerobic digesters, providing a carbon intensity that is said to be 95% less than the lifecycle greenhouse gas emissions of pure fossil fuels and non-conversion of poultry waste matter. BP also has an agreement with Gevo Inc in Iowa to purchase RNG produced from cow manure, also for sale in California.
But road fuels aren’t the only avenue for large-scale embracing of renewables. It could take to the air, literally. After all, the global commercial airline fleet currently stands at over 25,000 aircraft and is expected to grow to over 35,000 by 2030. All those planes will burn a lot of fuel. With the airline industry embracing the idea of AAF (or Alternative Aviation Fuels), developments into renewable jet fuels have been striking, from traditional bio-sources such as palm or soybean oil to advanced organic matter conversion from agricultural waste and manure. Chevron, again, has signed a landmark deal to advance the commercialisation. Together with Delta Airlines and Google, Chevron will be producing a batch of sustainable aviation fuel at its El Segundo refinery in California. Delta will then use the fuel, with Google providing a cloud-based framework to analyse the data. That data will then allow for a transparent analysis into carbon emissions from the use of sustainable aviation fuel, as benchmark for others to follow. The analysis should be able to confirm whether or not the International Air Transport Association (IATA)’s estimates that renewable jet fuel can reduce lifecycle carbon intensity by up to 80%. And to strengthen the measure, Delta has pledged to replace 10% of its jet fuel with sustainable aviation fuel by 2030.
In a parallel, but no less pioneering lane, France’s TotalEnergies has announced that it is developing a 100% renewable fuel for use in motorsports, using bioethanol sourced from residues produced by the French wine industry (among others) at its Feyzin refinery in Lyon. This, it believes, will reduce the racing sports’ carbon emissions by an immediate 65%. The fuel, named Excellium Racing 100, is set to debut at the next season of the FIA World Endurance Championship, which includes the iconic 24 Hours of Le Mans 2022 race.
But Chevron isn’t done yet. It is also falling back on the long-standing use of vegetable oils blended into US transport fuels by signing a wide-ranging agreement with commodity giant Bunge. Called a ‘farmer-to-fuelling station’ solution, Bunge’s soybean processing facilities in Louisiana and Illinois will be the source of meal and oil that will be converted by Chevron into diesel and jet fuel. With an investment of US$600 million, Chevron will assist Bunge in doubling the combined capacity of both plants by 2024, in line with anticipated increases in the US biofuels blending mandates.
Even ExxonMobil, one of the most reticent of the supermajors to embrace renewables wholesale, is getting in on the action. Its Imperial Oil subsidiary in Canada has announced plans to commercialise renewable diesel at a new facility near Edmonton using plant-based feedstock and hydrogen. The venture does only target the Canadian market – where political will to drive renewable adoption is far higher than in the US – but similar moves have already been adopted by other refiners for the US market, including major investments by Phillips 66 and Valero.
Ultimately, these recent moves are driven out of necessity. This is the way the industry is moving and anyone stubborn enough to ignore it will be left behind. Combined with other major investments driven by European supermajors over the past five years, this wider and wider adoption of renewable can only be better for the planet and, eventually, individual bottom lines. The renewables ball is rolling fast and is only gaining momentum.
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