AJOT Digital Edition
Issue #590 | Perishables | Mediterranean | Middle East | Africa Trade

Cover of issue-590.png

Peroshables

Mediterranean | Middle East | Africa Trade

View Issue #590 Now!

2014 Media Kit
  • Share this article:

Analysis on Indonesia’s energy sector released by U.S. Energy Information Administration

By: | at 10:08 AM | Liner Shipping  

Indonesia is the most populous country in Southeast Asia and the fourth most populous country in the world, behind China, India, and the United States. Formerly a net oil exporter in the Organization of the Petroleum Exporting Countries (OPEC), Indonesia struggles to attract sufficient investment to meet growing domestic energy consumption because of inadequate infrastructure and a complex regulatory environment. Despite their energy struggles, it was the world’s largest exporter of coal by weight in 2012 and the fourth-largest exporter of liquid natural gas (LNG) in 2013. As Indonesia seeks to meet its energy export obligations and earn revenues through international market sales, the country is also trying to meet demand at home.

Indonesia’s total primary energy consumption grew by 44% between 2002 and 2012. The petroleum share, although decreasing, continues to account for the highest portion of Indonesia’s energy mix at 36% in 2012. In the past decade, coal consumption nearly tripled and surpassed natural gas as the second most consumed fuel.

Indonesia is also a significant consumer of traditional biomass and waste in its residential sector, particularly in the more remote areas that lack connection to the country’s energy transmission networks. In 2012, Indonesia consumed over 2 quadrillion British thermal units (BTU) of biomass energy, and the government hopes to leverage the country’s vast renewable sources of hydroelectricity, geothermal, solar, and biomass and waste, to generate electricity for domestic consumption.

Indonesia’s total energy demand is closely linked to the country’s economic expansion. According to the International Monetary Fund (IMF), Indonesia sustained relatively strong economic performance throughout the global recession, with an average gross domestic product (GDP) growth rate of just under 6% per year between 2008 and 2012. However, in 2013, GDP growth fell below 6%. Overall, the energy sector (including electricity) constituted 15.6% of Indonesia’s GDP in 2012 and has held roughly constant at this level since 2005. Net foreign direct investment (FDI) more than doubled between 2008 and 2012 but shrank by roughly 15% in 2013.

The energy sector continues to influence the economy to a large degree. Oil and gas alone constituted one-fifth of merchandise exports in 2012, according to IHS Global Insight. In addition, revenues from the oil and gas sector accounted for 24% of total state revenues in 2012. A combination of healthy growth, market reforms, and a stable government has encouraged rapid investment, particularly in the commodity sector. Moody’s Investors Service and Fitch Ratings both upgraded Indonesia’s sovereign risk rating to an investment grade status between late 2011 and early 2012.

On the other hand, investment in infrastructure was around 3% of GDP in 2011, well below most of Indonesia’s neighbors, according to IMF data. The government signed land reform legislation in late-2011 to pave the way for more private sector infrastructure development. It also unveiled a new development strategy in 2011 (Master Plan for Economic Expansion and Acceleration 2011-2025) that emphasized more private sector involvement in infrastructure expansion, such as wider use of public-private partnerships in the oil and gas sector. Despite these efforts, many infrastructure projects continue to be delayed, and regulatory challenges and uncertainties have reduced predictability for foreign investors.

SOURCE: U.S. Energy Information Administration