Jakarta. President Joko Widodo recently appointed former Minister of Transportation Ignasius Jonan as Minister of Energy and Mineral Resources, while the former Minister of Energy and Mineral Resources Arcandra Tahar was appointed as Jonan’s second man.
After the installment of the pair of Minister and Vice Minister of Energy and Mineral Resources on Friday 14 October 2016, President Joko Widodo explained the reason behind the appointment, “Both of them are stubborn, but they like go down to the field”, President said.
Energy and mineral sectors need to be led by the tough figures like Jonan and Arcandra. Executive Director of ReforMiner Institute Komaidi Notonegoro said that the two figures are courageous and out of the box in making breakthrough. Komaidi said that Jonan-Arcandra is facing complicated problems in the sectors, which have to be settled immediately.
On oil and gas sector, Indonesia’s oil production continues to decrease. In 2020, Indonesia’s crude oil lifting is only around 480,000 barrels per day-500,000 barrels per day. Indonesia’s gas production also continues to drop. In 2020, Indonesia’s gas lifting is only around 1.1 million barrels of oil equivalent per day to 1.2 million barrels of oil equivalent per day.
On the other side, domestic oil consumption is uncontrolled. To date, the domestic oil consumption is 1.6 million barrels per day, and will hike to 2.2 million barrels per day within ten years.
The drop in oil production is caused by the lack of new oil fields. The exploration of new fields is stunted by the complicated licensing process, the absences of fiscal incentive, the high cost of exploration, and the low oil price. Furthermore, the revision on Law on Oil and Gas is also stagnant in the House of Representatives (DPR).
It is predicted that Indonesia’s oil reserves will run out within eight years if the country fails to explore new oil fields, while the gas reserves will run out within ten years. Aside of decreasing state revenues from the oil and gas sector, the import of oil and gas will be a burdensome for Indonesia’s trade balance.
On mineral and coal, Indonesia is facing the problem in the inconsistency to create downstream production. To date, there are only 23 smelters, while four other smelters will be established before the end of 2016.
The current condition was caused by two factors. First, the lack of government’s firmness in implementing the Law No 4/2009 on Mineral and Coal Mining. Second, the lack of ability to complete the construction of smelters due to the decline in mineral price.
The relaxation of crude mineral’s export has undermined the confidence of smelter investors, whereas investors have spent around US$12 billion in investments for the projects.
Amid the current condition, government will lose potentials to obtain maximum value added from mining sector.
Meanwhile, Corruption Eradication Commission (KPK) identifies 3,772 problematic mining licenses out of 11,000 mining licenses. The massive problematic licenses were caused by the overlapping licensing procedure as the negative impact of decentralization. Aside of the overlapping licensing process, corruption is identified as the cause of problematic license, while some mining companies fail to comply with tax obligations.
These problems have made government fail to have maximum benefit from mining companies operations for central and local governments. Meanwhile, the problematic mining licenses have created uncontrolled forest destructions.
The duet of Jonan-Arcandra also needs to cope with the lack of new and renewable energies exploration for electricity sector, while Indonesia actually has large potentials to develop those types of energies. Jonan-Arcandra also has to improve the implementation of policy on the mandatory use of biofuels.
The lack of consumption has led to low price in new and renewable energies. Therefore, the sector is less attractive for investors, while the incentives for producers and consumers of biofuels are also less attractive.
If Jonan-Arcandra fail to optimize the exploration of new and renewable energies, Indonesia will be struggling to break away from dependence on fossil energy resources, most of which are imported.
(MUHAMMAD FARID/Translator)
