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Interview

with Dr. Marwansyah Lobo Balia, Secretary General, National Energy Council

07.07.2012 / Energyboardroom

Would you begin by giving an introduction of the National Energy Council to our readers?

The council is, among others, assigned to the drafting and formulating of national energy policies, deciding on a general plan of national energy, deciding steps to lessen the energy crisis, and supervising the cross-sectoral implementation of energy policies.

Currently the National Energy Council is drafting the National Energy Policy. The draft is ready and in coming weeks we will be further perfecting it, and then it will be sent to parliament for approval. The draft is for Indonesia’s energy policy from now until 2050, which is a big jump in time. The energy policy will lay out a roadmap for securing the energy supply for the whole country. This is not an easy task; we have to balance our resources.

Ten years back the contribution of earnings from oil & gas was very good, but now it is decreasing. The total national budget it is about 1.500 trillion rupiah, and the earnings from oil & gas and mining are about 300 trillion.

Indonesia is a growing country and is continuously short of energy. Our GDP is still very modest and we should therefore encourage growth by supplying plentiful and affordable energy to boost the income generated by business. Indonesia has always faced the challenge of making its oil and gas sector competitive and an attractive destination for foreign investors.

For 60 years we used to sell all of our resources just to create revenues, but indeed we try to shift the paradigm away from just extracting the resources and selling them. This will not suffice anymore; we have to create added value processes.

How will the future shape of the energy industry look?

Indonesia needs to improve the efficiency of its energy sector and diversify our energy sources with new, unconventional and renewable energy as well as carbon capture storage. The share of coal bed methane (CBM) and shale gas will increase within the energy matrix. The use of LNG will increase for domestic supply in order to meet the needs of a diffuse population spread out around the archipelago. More than a 100 million Indonesians still do not have access to decent & reliable energy sources. Increasing this access is our priority. Indonesia will dramatically cut its use of diesel power plants. In the longer-term future we are going to use other resources than fossil fuels. The use of renewables will increase significantly, especially geothermal, solar, hydro, and bio fuel.

What is behind the reshaping of Indonesia’s energy policy?

Global oil prices drive or undermine economies, influence the behavior of businesses and have a great impact on individuals. The world has had this problem for a long time, but the current escalation in global oil prices has reached an unprecedented level. In 2006 Indonesia became a net oil importer so these high prices harm Indonesia’s economic growth. A Presidential decree prescribes that Indonesia must decrease its dependency on oil and in order to tackle this situation the National Energy Council has started to look for other resources to substitute our oil dependence. This will naturally take time.

Oil dependence is a hard disease to shake. The reason for our dependency on fossil fuels stems from the invention of the combustion engine. Prior to that invention we were dependent on the steam engine, and prior to that – on animal power. All these shifts were major revolutions, and a similar revolution is needed if we want to move away from our fossil fuels dependency.

Indonesia is still heavily subsidizing energy. How will energy subsidies fit within future strategy?

To date, the subsidies that we give on energy are almost on a par with what we earn from oil & gas and it is about 1/5 of the state budget. The government plans to heavily reduce subsidies for electricity and fuel in the immediate future, of course the sooner the better. This just not to relieve the burden on the state budget, but we could allocate the fund for others, such as for enhancing or build more energy infrastructures that will help to strengthen the energy security.

The council consists of 17 people, how do you agree on main issues?

Council members include the ministers of agriculture, finance, national planning, industry, transportation, environment and research and technology.

To balance the government officials, the council also has eight members from the private sector, including academics, environmentalists, consumer advocates and industry and technology representatives. Still, Energy and Mineral Resources Minister Jero Wacik is also the council`s executive chairman, and he is the final decision maker.

There was always a lack of clarity on the responsibilities when it came to energy, and with the creation of the Council the situation has become much clearer. We did not have proper coordination between the developing energy needs of the country and how we would meet this demand. This council is doing this. The council members are representatives of different industries and segments of society and come together twice a week. Currently we are discussing the National Energy Plan.

It could be argued that as energy strategy is switched away from a generator of export revenues to the support for domestic economic growth that governance across an archipelago of 17,500 islands could be better handled at a regional level. What is your viewpoint on allowing the regions to manage the operational environment?

Accepting the greater role of the regions in national energy policy is recognized in our draft of the Indonesia’s energy strategy. Energy still falls within the responsibilities of the central government. In this country, natural resources belong to Indonesia and not to a region. Oil in Balikpapan belongs to the whole country, and we have to divide it, although Balikpapan may receive a larger share.

How optimistic are you about the future, about gaining energy independence for Indonesia in the coming three to five years?

Democracy is great but it comes with its own set of challenges; everybody has a voice now. We are well on our way to overcoming the challenge, and the National Energy Council plays a big role as it established the right platform to determine the needs of the country. Energy independence will be achieved in the near future.

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