Indonesia – Infrastructure Introduction

Infrastructure Policy :-

The Indonesian government has in recent years put in place a robust institutional framework to support its infrastructure plans. In the last year it has announced 13 economic policy packages focusing on the deregulation of investment and tax incentives. The government expects these deregulation packages to improve Indonesia’s competitiveness and help to attract investment by cutting bureaucracy and providing greater legal and business certainty. A key target announced by the President is to raise Indonesia’s position in the World Bank’s Ease of Doing Business index to 40 by 2017. Indonesia has moved to position 109 this year, compared to 120 last year, out of 189 economies, but it is still behind directly competing Association of Southeast Asian Nations (ASEAN) countries such as Singapore, Malaysia and Thailand. The government expects that the impact of the deregulation programme will be more significant in the coming years since it plans to speed up implementation of deregulation packages at the working level.

Sector’s Overview :-

Oil & Gas :-

With the current oil price around US$ 40-50/barrel (bbl) in 2015-16, many oil exploration and production activities have slowed down and even halted, despite the government’s stated desire to boost exploration and production. A large proportion of the investment (US$ 20bn out of the US$ 30bn) is in upstream. The government also has its focus to building infrastructure in the downstream sector – particularly in oil refining capacity and gas distribution. This is in line with the government’s focus on providing infrastructure for the domestic consumption of Indonesian energy, and enhancing energy self sufficiency and security.

As at 2015, Indonesia’s current proven gas reserves are 97.99 trillion standard cubic feet (tscf) with the potential for 53.44 tscf . The abundant gas reserves and uncertainty of oil-related investment have driven the government to shift from the previously export-oriented policies to domestic utilisation, as demonstrated in the increase in the proportion of gas in the National Energy Mix (from 18% in 2013 to 22% in 2025 and 24% in 2050). With such policies in place, gas demand is expected to reach 6,453.2 million standard cubic feet of gas per day (mmscfd) by 2028.

The government has developed a national gas infrastructure roadmap which supports the development of an integrated national gas pipeline network, consisting of: 

· A pipeline connecting existing transmission in the north of Sumatra to South Sumatra, and then on to the Java transmission network through Jakarta. · Pipelines connecting Jakarta to West Java and to East Java to enhance the transmission capacity. 

· A planned transmission pipeline from Central Java to Kalimantan. · A pipeline across Sulawesi island, supplied by onshore receiving facilities in South Sulawesi.

In line with the gas infrastructure roadmap, several liquefied natural gas (LNG) receiving and processing facilities are planned to ease the distribution of LNG.

Power Generation :-

The government of Indonesia has set an ambitious target of adding 35 GW of capacity before 2019. Given 8 GW of ongoing projects, PLN, the national state-owned utility, is planning for a total of 43 GW of new capacity within this time frame. Including transmission and distribution, the required capital investment is around US$ 73 bn. The government also wants to increase household access to a reliable power source, which in remote areas is likely to involve mini-grids and other innovative solutions. Coal is projected to account for 50% of generation by 2025, natural gas 29%, and renewables 19%.