Energy and Mineral Resources Minister Ignasius Jonan speaks at a discussion on investment climate in the energy sector in Jakarta on Monday. (JG Photo/Nur Yasmin)

Cost-Efficiency Key to Lift Energy Sector: Minister


OCTOBER 14, 2019

Jakarta. Energy and Mineral Resources Minister Ignasius Jonan told local oil and gas companies on Monday that they need to increase efficiency to maintain competitiveness and adapt themselves to global changes in the industry.

"When I was first elected [as minister], frankly I was surprised [at seeing] how far behind the energy sector was [compared to other industries]. The president has made it clear we must increase our efficiency, so everyone now must think of how they can produce better products at more competitive prices," Jonan said at the "Building the Investment Climate for the Energy Sector" discussion in Jakarta on Monday.

The minister pointed out that the oil business has experienced significant global changes and that the local industry has to be able to adapt to them.

He said players in the sector must think about cost-efficiency first and foremost. 

"We can't control oil and gas prices, but we can control cost-efficiency. This sector cannot stand on its own, customers determine the market, not the other way around," Jonan said.

According to Jonan, the oil and gas market is gradually shifting to the petrochemical sector, while the biggest consumer of oil remains the transportation sector.

Even so, the use of renewable energy in the sector continues to grow, driven by higher production and sales of electric cars, Jonan said.

He suggested the local oil and gas industry should also shift its focus to the petrochemical sector.

"Even those who have already built [oil and gas] refineries; they should still consider moving to the petrochemical industry," he said.

"Now with the [increased pace of] development in renewable energy, the future is petrochemical. The potential is huge," Jonan said.

He said the keys to success in the energy sector are efficiency, activity and increased downstreaming.

"I am suggesting we go along with the changes. Japan and China are importing energy products but they can produce them without incurring a deficit. The key is to use energy as efficient as possible, and make the customers buy it," Jonan said.

The minister said the government is sticking to its target of drawing 23 percent of its national energy consumption from renewable sources by 2025.

This is partly why the government has been campaigning heavily for B30, diesel fuel mixed with 30 percent biodiesel, after the successful introduction of B20 (a 20-80 biofuel-diesel mix) earlier this year. 

"It's not an easy target," Jonan said. 

The minister said Indonesia has an abundance of renewable energy sources but has not made enough effort to develop them.

"Geothermal [energy], for example, requires huge capital and investors still think it's risky. Drilling costs at least $30 million and sometimes you get nothing or just a small amount. That's why we still have no geothermal companies," Jonan said.

"The government will spend Rp 33 trillion on exploration because there are still many resources we haven't exploited yet," Jonan said.

Currently, Indonesia has at least 61 billion barrels of untapped oil reserves, the minister said.