Indonesia Energy

As its domestic energy demand soars, Indonesia continues to diversify its supply, taking steps to reduce its dependence on oil. The archipelagic nation is increasingly looking to renewable sources, such as geothermal, to help meet its energy needs.

As hydrocarbons production in maturing blocks has declined and domestic energy consumption has increased, the Indonesian government has been looking for ways to boost investment in the country’s upstream oil and gas sector. Some of the measures the government has undertaken have proved effective at attracting investors, including increased incentives and a more flexible production sharing contract (PSC) framework introduced in 2008. However, regulations that were implemented in early January 2011 may have the opposite effect.

State-controlled natural gas distributor Perusahaan Gas Negara (PGN) has objected to calls for a potential price increase from its upstream suppliers. At the same time, the distributor, facing rising domestic demand and an irregular supply, is considering new sources of natural gas, including the purchase of blocks in North Sumatra.

Indonesia’s energy industry is looking to ramp up investments at home and abroad to boost output and help meet the growing demand from the domestic market while maintaining its position as a leading natural gas exporter.