April 2003

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Indonesia
Indonesia is important to world energy markets because of its OPEC membership and substantial, but declining, oil production. Indonesia also is the world's largest liquefied natural gas (LNG) exporter.

The information contained in this report is the best available as of April 2003, and can change.

GENERAL BACKGROUND
Indonesia's economic growth increased modestly in 2002 despite the continuing global economic slowdown. Indonesia's real gross domestic product (GDP) grew at a rate of 3.7% in 2002, up from 3.1% in 2001. Real GDP growth is forecast at 3.8% for 2003, a sign that the nation's economy will continue its recovery from the fiscal crisis of 1997.

With about 75% of Indonesian businesses in technical bankruptcy following the country's economic collapse in 1998, the government was forced to turn to the International Monetary Fund (IMF) for an emergency debt-relief package totaling $43 billion. The IMF recommended that Indonesia implement an economic reform program in order to help save its economy. IMF recommendations included creating greater transparency in the issuing of government loans and subsidies, and stricter enforcement of laws and regulations in the area of government procurement. The government has announced several reform initiatives since receiving the IMF bailout package, including the planned privatization of several sectors of the economy, but progress has been slow. A follow-on loan package, from several lenders including the United States and the IMF, was approved in October 2000. Installments of IMF funds were delayed in 2001 due to delays in economic reforms, but in September 2001, the IMF resumed transfers and released a $395 million loan tranche under the follow-on loan package. In March 2003, the IMF reported that Indonesia had made good progress in the institution of reforms, and disbursed $469 million in further aid. The review cited Indonesia's continued economic growth, decreasing inflation rates, and strengthened banking sector as examples of the progress made, while mentioning that more reforms will be necessary in 2003 (the final year of the assistance program) to increase the country's attractiveness to foreign investors.

President Megawati Sukarnoputri has been in power since July 2001, assuming the presidency after her predecessor, President Abdurrahman Wahid, was removed from office by the national legislature. The regional challenges facing the Indonesian government remain the same:  a separatist movement in Aceh; an oil and gas rich province in north Sumatra which abuts the strategically important Strait of Malacca; and a separatist movement in Irian Jaya, a gas-rich province at the eastern end of the country.

One of the key areas in which energy and politics intersect in Indonesia is the distribution of oil and gas revenues between the central government in Jakarta and regional governments in areas which produce oil and gas. Since Indonesia's transition to democracy, the country's regional governments have been pressing for a greater share of oil and gas revenues. In particular, the separatist movement in Aceh has caused security problems for oil and gas companies in that region, although recent government talks ended in a peace deal in December 2002. However, some violence has continued despite the agreement, and international monitors were withdrawn in April 2003 following threats and intimidation attacks against their offices. An unrelated bombing of nightclubs in Bali, which claimed about 200 lives, prompted the Indonesian government to impose increased security measures on some energy and mining facilities.

OIL
Indonesia currently holds proven oil reserves of 5 billion barrels, which represents a 14% decline in proven reserves since 1994. Much of Indonesia's proven oil reserve base is located onshore. Central Sumatra is the country's largest oil producing province and the location of the large Duri and Minas oil fields. Other significant oil field development and production is located in accessible areas such as offshore northwestern Java, East Kalimantan, and the Natuna Sea. Indonesian crude oil varies widely in quality, with most streams having gravities in the 22^o to 37 ^o API range. Indonesia's two main export crudes are Sumatra Light, or Minas, with a 35 ^o API, and the heavier, 22^o API Duri crude. A study released in August 2002 by Indonesia's Directorate General of Oil and Gas shows that oil reserves in the Cepu block alone, located in Central/East Java, are close to 500 million barrels, about half of which is considered recoverable.

During 2002, Indonesian crude oil production averaged 1.1 million barrels per day (bbl/d), having decreased from just over 1.2 million bbl/d in 2001. The recent declines in production are due mainly to the natural decline of aging oil fields, which recent oil discoveries have been too small to offset. Besides crude oil, Indonesia also produces approximately 230,000 bbl/d of natural gas liquids and lease condensate, which are not part of its OPEC quota, bringing the country's total oil production to around 1.3 million bbl/d. Indonesia is the only Southeast Asian member of OPEC, and its current OPEC crude oil production quota is 1.27 million bbl/d.  

The majority of Indonesia's producing oil fields are located in the central and western sections of the country. Therefore, the focus of new exploration has been on frontier regions, particularly in eastern Indonesia. Sizable, but as of yet unproven, reserves may lie in the numerous, geologically complex, pre-tertiary basins located in eastern Indonesia. These regions are much more remote and the terrain more difficult to explore than areas of western and central Indonesia.

One significant oil find made by Indonesian state oil company Pertamina occurred in March 2003. The three wells drilled, located in Prabumulih, in South Sumatra, have hit reserves that are estimated to hold about 230 million barrels of oil. An earlier significant oil and natural gas discovery was made by Pertamina in December 2002. Oil and gas deposits located in the village of Gunung Kemala, in South Sumatra, are estimated to include 230 million barrels of oil, and 590 billion cubic feet (bcf) of natural gas. Pertamina hopes to make the deposits productive during 2004.

In December 2002, Italian-based firm ENI and Unocal signed a production-sharing agreement with Indonesia to explore for oil and gas offshore South Sulawesi. Each company holds a 50% stake, and will spend a total of $35 million over the next six years to explore the Mauru Bakau block, which is approximately 700 square miles in size and located in the Makassar Strait.

China National Offshore Oil Corporation (CNOOC) became the largest offshore oil producer in Indonesia in January 2002, after purchasing nearly all of Repsol-YPF's assets in the country for $585 million. The assets acquired by CNOOC are as follows:  a 65.34% stake in the South-East Sumatra PSC, a 36.72% stake in the North-West Java PSC, located offshore, a 50% stake in the Poleng PSC, a 25% stake in the West Madura PSC, and a 16.7% stake in the Blora PSC. Pertamina is one of CNOOC's partners in all of those PSCs. Repsol-YPF retained ownership of a 25% stake in a joint venture with Pertamina at the Jambi-Merang natural gas field.

Companies producing from existing fields are investing in programs to increase recovery rates and to prolong the life of the fields. Caltex, which has the largest operation of any multinational oil company in Indonesia, is undertaking a steam injection project at the Duri field on Sumatra.

Three major new oil projects are expected to begin production before 2004. Unocal's West Seno field, under development offshore from East Kalimatan, is expected to be producing 40,000 bbl/d by May 2003 and eventually peaking at 60,000 bbl/d. An additional 100,000 bbl/d of production capacity is to be added by Conoco's Belanek project in the West Natuna Block B by 2004. ExxonMobil's Banyu Urip field, in Java, is expected to come onstream in 2003 and reach its peak production capacity of 100,000 bbl/d in 2004. Even with these new fields, though, Indonesia's oil production is not likely to rise markedly, due to the continuing decline of mature fields. The country could possibly become a net oil importer by the end of the current decade.

Oil Sector Reforms
The liberalization of Indonesia's downstream oil and gas sector has been under discussion for several years. In October 2001, the Indonesian legislature passed legislation which will remove Pertamina's monopoly on upstream oil development (which requires it to be included in all PSCs) by the end of 2003. Its monopoly on the distribution of petroleum products is to be terminated by 2004.

Indonesia's Ministry of Mines and Energy will take over the function, currently carried out by Pertamina, of awarding and supervising production sharing contracts with foreign oil companies. Foreign firms also are to be freed from some of the regulatory approval requirements which they argue hinder their efficiency. Subsidies for domestic petroleum products consumption have been reduced in a bid to reduce the government's budget deficit and restrain increases in domestic consumption. One concern foreign oil companies have with the new law is the granting of a limited authority to regional governments to tax oil companies' profits.

Pertamina is planning to adopt a franchise system for its liquified petroleum gas (LPG) by 2006. The new system will require Pertamina to sever ties with its current retailers, who act as sub-agents of Pertamina now. The state-run company is concerned about proper distribution of LPG to end-users, an area that has been problematic for Pertamina in the past.

Refining
Indonesia has eight refineries, with a combined capacity of 992,745 bbl/d. The largest refineries are the 348,000-bbl/d Cilacap in Central Java, the 240,920-bbl/d Balikpapan in Kalimantan, and the 125,000-bbl/d Balongan, in Java. 

PT Kilang Minyak Intan Nusantara, a joint venture of Al-Banader International Group of Saudi Arabia (40 percent), China National Electrical Equipment Corporation (40%) and PT Intanjaya Agromegah Abadi (20%), are investing a total of $6 billion to build two Indonesian oil refineries, one  in Pare-Pare, South Sulawesi and the other in Batam Island, Riau. Both projects are expected to be operational in 2005, and have identical specifications that show they will each process 300,000 bbl/d. The refineries will be export-oriented, taking Saudi crude and refining it for sale primarily to the Chinese market.

In February 2003, Pertamina announced that it would build the planned Tuban refinery alone, after its partnership with Saudi Arabia's Hi-Tech International Group collapsed. The Saudi firm failed to raise enough money to finance its portion of the 100,000 bbl/d refinery. Construction costs are estimated at $250 million, and it will process oil mainly from the Cepu Block.

NATURAL GAS
Indonesia has proven natural gas reserves of 92.5 trillion cubic feet (Tcf). Most of the country's natural gas reserves are located near the Arun field in North Sumatra, around the Badak field in East Kalimantan, in smaller fields offshore Java, the Kangean Block offshore East Java, a number of blocks in Irian Jaya, and the Natuna D-Alpha field, the largest in Southeast Asia. Despite its significant natural gas reserves and its position as the world's largest exporter of liquefied natural gas (LNG), Indonesia still relies on oil to supply about half of its energy needs. About 70% of Indonesia's LNG exports go to Japan, 20% to South Korea, and the remainder to Taiwan. As Indonesia's oil production has leveled off in recent years, the country has tried to shift towards using its natural gas resources for power generation. However, the domestic natural gas distribution infrastructure still is not extensive.

A particularly significant Indonesian gas field, Natuna, is located in the South China Sea, 683 miles north of Jakarta and 140 miles northeast of Natuna Island. Discovered in 1970 by Italy's Agip, the field contains an estimated 46 Tcf of recoverable reserves. Agip relinquished its concession, however, and the field has been developed only recently. In January 1999, SembGas of Singapore signed a contract to purchase 325 million cubic feet per day (Mmcfd) of natural gas from the West Natuna Gas Consortium, a joint venture consisting of Pertamina, Conoco, and Gulf Indonesia Resources. A contract for the pipeline was awarded to McDermott International, which began supplying natural gas to Singapore in mid-2001. In November 1999, Conoco reported a new gas discovery at West Natuna which raised reserves by about 1 Tcf.

Four major gas pipelines went on stream during 2002, all owned by PT Perusahaan Gas Negara (PGN). The first is a 50 million cubic feet per day (mcf/d) distribution line going from Jambi to the Lampung region. The second and third are 500 mmcf/d pipelines going from Pagardewa to Cilegon, and from Cilegon to Cimanggis, respectively. The fourth pipeline is a distribution line in the western area of West Java that has a capacity of 550 mmcf/d. PGN is slated to be privatized, and has six more pipeline projects to build, with capacities ranging from 50 mmcf/d to 1000 mmcf/d.

In September 2002, PT Perusahaan Gas Negara (PGN), Indonesia's natural gas pipeline operating and distribution company, announced its intention to sell a 40% stake in PT Transgasindo (a subsidiary also called Transco I) to a consortium called Trans Asia Pipeline Company for $180 million. The consortium's members include Malaysia's Petronas and ConocoPhillips. Transgindo currently owns and operates a 335 mile natural gas pipeline that connects South Sumatra to the Duri steamflood project in Central Sumatra. It also has plans to build another natural gas pipeline from South Sumatra to Singapore, which would deliver about $9 billion worth of natural gas over a 22-year period.

Also in September 2002, China awarded an $8.5 billion contract to Indonesia to supply China's planned terminal in Fujian Province with LNG for 25 years, beginning in 2007. The LNG will be supplied from the Tannguh natural gas field, which is operated by BP. Construction of the terminal will begin in 2004, and completed in 2007. Included in the deal was an agreement for BP to sell 12.5% of its stake in the Tangguh field to CNOOC. The purchase took place in February 2003, and cost CNOOC $275 million, and included the Berau PSC, the Muturi PSC, and the Wiriagar PSC.

A major related project in the planning stages is BP's Tangguh LNG project in Irian Jaya, based on over 14 Tcf of natural gas reserves found onshore and offshore the Wiriagar and Berau blocks. The project would involve two trains with a combined capacity of 7 million tons per year. BP's current plans call for the project to be completed by 2007. Three bids have been offered by different consortia for the design and construction of the project's onshore facilities: one by the Bechtel group, another led by Chiyoda and Technip, and a third by Kellogg, Brown & Root and JGC Corporation. . The bids were valued between $1.4 and 1.5 billion each. The project is considered risky due to an active separatist movement in Irian Jaya. BP holds a 48% interest in the Berau block with partners Mitsubishi at 22.87%, Nippon Oil Exploration, 17.14% and KG Berau Petroleum, 12%. For the Wiriagar block, Arco holds an 80% interest and KG Wiriagar Petroleum Ltd. holds the remaining 20%. BP announced in November 2001 that it had signed an agreement to supply LNG to the Philippines beginning in 2006, and in December 2001 announced that it had made a formal proposal to China for supplies of gas to its planned Guangdong LNG regasification terminal. El Paso Energy has been reported to have had discussions on possible supplies of LNG from Tangguh to future import terminals in the United States or Mexico.

In another possible use for Indonesia's gas resources, Shell is examining the possibility of building a gas-to-liquids (GTL) plant in Indonesia. The plant, if the project goes forward, would produce 70,000 bbl/d of diesel and other middle distillates using the Fischer-Tropsch GTL process.

COAL
Indonesia has 5.92 billion short tons of recoverable coal reserves, of which 85% is lignite and 15% is anthracite. Sumatra contains roughly two-thirds of Indonesia's total coal reserves, with the balance located in Kalimantan, West Java, and Sulawesi. In 2001, Indonesia exported 60.6 million short tons (Mmst), or about 60% of its coal production. The majority of these exports are destined for Japan, South Korea, Taiwan.

Indonesia plans to double coal production over the next five years, mostly for exports to other countries in East Asia and India. The new capacity will come primarily from private mines. The Clough Group of Australia was awarded a $215 million contract for improvements at the Indonesian firm GBP's Kutai mine in East Kalimatan. Another foreign firm with major interests in Indonesian coal mining is Australia's Broken Hill Proprietary (BHP).

In keeping with Indonesia's plan to increase coal production, Banpu Pcl announced in March 2003 that it plans to invest $40 million by the end of 2003 to increase its own level of coal production.

ELECTRICITY GENERATION
Indonesia has installed electrical generating capacity estimated at 21.4 gigawatts, with 87% coming from thermal (oil, gas, and coal) sources, 10.5% from hydropower, and 2.5% from geothermal sources. Prior to the Asian financial crisis, Indonesia had plans for a rapid expansion of power generation, based mainly on opening up Indonesia's power market to Independent Power Producers (IPPs). The crisis led to severe financial strains on state-utility Perusahaan Listrik Negara (PLN), which made it difficult to pay for all of the power for which it had signed contracts with IPPs. PLN has over $5 billion in debt, which has grown markedly in terms of local currency due to the decline in the value of the rupiah. The Indonesian government has been unwilling to take over the commercial debts of PLN.

In February 2003, it was reported that PLN was seeking a $180 million loan from the World Bank to help develop electricity transmission networks in the provinces of Sumatra and Kalimantan. The loan would also help develop an information technology system. The World Bank will discuss the loan in July.

In January 2003, the World Bank announced that it was planning to build three micro-hydropower plants in the Indonesian province of Papua (also known as Irian Jaya). A feasibility study on all of the area's water sources has already been conducted by the Bank, and the results are being studied. By building these facilities, the World Bank hopes to improve services to the local population as well as to encourage development activities in the province.

PLN has announced that it is ready to install up to 175,000 new electricity lines during 2003 to meet Indonesia's ever-increasing electricity demands. The lines would be installed by PLN's distribution unit for the provinces of West Java and Banten, and would be located in those provinces.

Indonesia has plans to build a new 600-MW power plant northeast of Jakarta, in an effort to relieve power shortages in the country's main power grid, Java-Bali. Little new foreign investment has been made in recent years, prompting government action.

In 2002, Indonesia's government undertook measures to liberalize the nation's electricity market in order to make it more interesting for foreign investment. Competition for power generation will be open on the islands of Batam, Java, and Bali by 2007. In 2008, retail competition in the electricity market will begin under the terms of the nation's new electricity law, approved in September 2002. The law requires an end to PLN's monopoly on electricity distribution within five years, after which time private companies (both foreign and domestic) will be permitted to sell electricity directly to consumers. However, all companies will need to use PLN's existing transmission network.

ENVIRONMENT
Indonesia's major environmental challenges involve supporting its large population. Air and water pollution have reached critical levels, especially on the most populated island of Java. Indonesia's carbon emissions remain low, but there is concern that an increase in the use of indigenous coal will increase Indonesia's carbon emissions in the coming years. Indonesia is well endowed with renewable energy potential, especially geothermal energy. Indonesia's renewable resouces are not yet fully exploited.

In March 2003, the Asian Development Bank approved a $600,000 grant to help combat Jakarta's air pollution problem. The technical assistance grant will be used primarily to promote a clean vehicle fuel program, known as the "Blue Skies" project. Indonesia is also phasing out the use of leaded gasoline, with a complete ban set to come into force in 2005.

ECONOMIC OVERVIEW
Minister for Economic Affairs: Kuntjoro-Jakti Dorodjatun
Currency: Rupiah
Exchange Rate (3/24/03): US$1 = 8,950 rupiah
Gross Domestic Product (2002E): $181.9 billion (2003E): $213.1 billion
Real GDP Growth Rate (2002E): 3.7%  (2003E): 3.8%
Inflation Rate (Consumer Price Index) (2002E): 11.9% (2003E): 7.7%
Merchandise Exports (2002E): $57.0 billion
Merchandise Imports (2002E): $31.2 billion
Merchandise Trade Balance (2002E): $25.8 billion
Major Export Products: Manufactured goods, petroleum, natural gas and related products, foodstuffs, raw materials
Major Import Products: Capital equipment, raw and intermediate materials, consumer goods, petroleum products
Major Trading Partners: Japan, United States, Singapore, Hong Kong, Britain, Australia

ENERGY OVERVIEW
Energy Minister: Purnomo Yusgiantoro  
Proven Oil Reserves (1/1/03E): 5.0 billion barrels
Oil Production (2002E): 1.3 million barrels per day (bbl/d), of which 1.1 million bbl/d was crude oil
OPEC Production Quota (since 2/1/03): 1.27 million bbl/d
Oil Consumption (2002E): 1.0 million bbl/d
Net Oil Exports (2002E): 305,000 bbl/d
Major Oil Customers: Japan, United States, South Korea, China, Australia, Taiwan, Singapore, Thailand
Crude Oil Refining Capacity (1/1/03E): 992,745 bbl/d
Natural Gas Reserves (1/1/03E): 92.5 trillion cubic feet (tcf)
Natural Gas Production (2001E): 2.44 trillion cubic feet (tcf)
Natural Gas Consumption (2001E): 1.28 tcf
Net Gas Exports (2001E): 1.16 Tcf
Major LNG Customers (2002): Japan, South Korea, Taiwan
Coal Reserves (12/31/01): 5.92 billion short tons of recoverable reserves of which 85% is lignite and 15% is anthracite
Coal Production (2001E): 99.6 million short tons (Mmst)
Coal Consumption (2001E): 39.0 Mmst
Net Coal Exports (2001E): 60.6 Mmst
Major Coal Customers (2001): Japan, Taiwan, South Korea, the Philippines
Electric Generation Capacity (1/1/01E): 21.4 gigawatts
Electricity Production (2001E): 95.8 billion kilowatt hours
Electricity Consumption (2001E): 89.1 billion kilowatt hours

ENVIRONMENTAL OVERVIEW
Total Energy Consumption (2001E):  4.63 quadrillion Btu* (1.1% of world total energy consumption)
Energy-Related Carbon Emissions (2001E): 87.13 million metric tons of carbon (1.3% of world total carbon emissions)
Per Capita Energy Consumption (2001E): 21.5 million Btu (vs U.S. value of 341.8 million Btu)
Per Capita Carbon Emissions (2001E): 0.41 metric tons of carbon (vs U.S. value of 5.5 metric tons of carbon)
Energy Intensity (2001E): 21,441 Btu/ $1995 (vs. U.S. value of 10,736 Btu/ $1995)
Carbon Intensity (2001E): 0.40 metric tons of carbon/thousand $1995 (vs. U.S. value of 0.17 metric tons/thousand $1995)
Fuel Share of Energy Consumption (2001E): Oil (46.9%), Natural Gas (30%), Coal (19.7%)
Fuel Share of Carbon Emissions (2001E): Oil (48%), Natural Gas (26.1%), Coal (25.9%)
Status in Climate Change Negotiations: Non-Annex I country under the United Nations Framework Convention on Climate Change (ratified August 23rd, 1994). Signatory to the Kyoto Protocol (signed July 13th, 1998 - not yet ratified).
Major Environmental Issues: Deforestation; water pollution from industrial wastes, sewage; air pollution in urban areas.
Major International Environmental Agreements: A party to Conventions on Biodiversity, Climate Change, Endangered Species, Hazardous Wastes, Law of the Sea, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, Tropical Timber 83, Tropical Timber 94 and Wetlands. Has signed, but not ratified, Desertification and Marine Life Conservation.

* The total energy consumption statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal, solar, wind, wood and waste electric power. The renewable energy consumption statistic is based on International Energy Agency (IEA) data and includes hydropower, solar, wind, tide, geothermal, solid biomass and animal products, biomass gas and liquids, industrial and municipal wastes. Sectoral shares of energy consumption and carbon emissions are also based on IEA data.
**GDP based on EIA International Energy Annual 2001

OIL AND GAS INDUSTRIES
Organizations: Perusahaan Pertambangan Minyak dan Gas Bumi Negara (Pertamina) - oil exploration, production, transportation, and marketing; Perum Gas Negara (PGN) -gas distributor and transmission company
Major Producing Oil Fields: Duri, Minas, Belida, Ardjuna, Arun, KG/KRA, Widuri, Nilam, Attaka
Oil Refineries (1/1/03): Cilacap, Central Java (380,000); Pertamina-Balikpapan, Kalimantan (240,920); Musi, South Sumatra (109,155); EXOR-1, Balongan, Java (125,000); Dumai, Central Sumatra (114,000); Sungai Pakning, Central Sumatra (47,500); Pangakalan Brandan, North Sumatra (4,750); Cepu, Central Java (3,420)
Product Pipelines: Trans-Java (serving the Surabaya market)
Oil Tanker Terminals: Java: Cilegon, Cilacap, Surabaya, Ardjuna B (offshore) Sumatra: Pangkalan Brandan, Belawan, Dumai, Musi, Perlak, Palembang, Tanjung Uban (offshore) Kalimantan: Balikpapan Sulawesi: Ujung Pandang Irian Jaya: Sorong, Jaya Seram: Bula Natuna Sea: Ikan Pari
Major Gas Fields: Sumatra: Arun, Alur Siwah, Kuala Langsa, Musi, South Lho Sukon, Wampu East Kalimantan: Attaka, Badak, Bekapai, Handil, Mutiara, Nilam, Semberah, Tunu Natuna Sea: Natuna Java: Pagerungan, Terang/Sirasun Irian Jaya: Tangguh
Major Gas Pipelines: Sumatra: Pangkalan Brandan-Dumai
LNG Plants: Arun, Bontang

For more information from EIA on Indonesia, please see:
EIA - Country Information on Indonesia

Links to other U.S. government sites:
CIA World Factbook - Indonesia
U.S. Department of Energy - Office of Fossil Energy - Indonesia
U.S. State Department Consular Information Sheet
U.S. State Department Country Commercial Guide
Library of Congress Country Study on Indonesia
U.S. State Department Background Notes on Indonesia
U.S. Embassy in Jakarta
U.S. Commercial Center in Indonesia

The following links are provided solely as a service to our customers, and therefore should not be construed as advocating or reflecting any position of the Energy Information Administration (EIA) or the United States Government. In addition, EIA does not guarantee the content or accuracy of any information presented in linked sites.

Indonesian Ministry of Mines and Energy
Indonesian Consulate General in the United States
Indonesian National Development Information Office
Pertamina
Links to Indonesian Industrial Sites

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File last modified: April 14, 2003

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