Indonesia and the world’s largest energy exporting countries

Posted on May 1, 2012

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Hanan Nugroho, Jakarta | Sun, 04/01/2012 12:45 PM

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The world’s largest energy exporting countries by continent are Canada for America, Russia for Europe and Indonesia for Asia.

Canada produces substantial volumes of oil, gas, coal and electricity and exports much of it to the world’s largest energy consumer, the Unites States. The world’s hungriest energy consumer, as the closest neighbor, has been traditionally a primary destination for Canada’s energy exports. However, recently Asian countries, which are relatively far by distance, are seeking access to Canada’s
energy wealth in attempts to fuel their continuous economic growth.

Russia is the world’s biggest energy producer. The energy super power holds the world’s largest natural gas reserves, the second largest reserves of coal, and the eighth largest crude oil reserves. The country is the world’s largest exporter of natural gas. By 2009, it surpassed Saudi Arabia as the largest crude oil producer.

Russia, which ranks fifth among the world’s largest hydroelectricity producers, is developing its renewable energy potentials. The Red Bear exports its energy mainly to Europe, but several energy projects are being developed to flow Russia’s energy (especially natural gas) to its neighbors in East Asia and to connect Japan and China in particular.

Asia is a huge energy importer. Three Asian countries (China, India and Japan), with the US and Russia, are the top five world energy consumers. Driven by huge population and rapid economic growth, Asian’s demand for energy is increasing rapidly as is the continent’s dependency on energy imports.

While most trade in natural gas and coal in Asia are intra-continental (with Indonesia acting as a major supplier), and crude oil can be refined in the region, Asia has a large and long dependency on the Middle East for its crude oil imports.

Indonesia’s position in Asia’s energy scene is unique as it is the largest (among the few) net-exporters of energy in Asia. Once the only OPEC member from the continent, Indonesia was once the largest exporter of LNG and is currently one of the world’s largest exporting countries for coal. Indonesia holds reserves of fossil fuels, substantial geothermal and biomass reserves.

Even though the three countries (Indonesia, Russia and Canada) are similar, as they are the largest energy exporters representing each continent, several factors distinguish Indonesia from the two others.

First is access to energy and energy adequacy in the domestic market. Indonesian access to energy is far more limited than that of the other two countries. Our energy consumption per capita is significantly lower than that of Canada and Russia. In those countries, modern energy services have penetrated to rural and remote areas, serving almost all the citizens.

On the contrary, in Indonesia many households are still struggling for adequate energy for households. The archipelago’s electrification ratio is just about 70 percent, distributed unevenly with only people in Java enjoying basic electricity service.

People’s accesses to commercial fuels (gasoline, gas, etc.) are hampered in remote areas and small islands, which is not the case for Russia and Canada, which also possess similar wide geographic areas.

Second is energy reserves and production. Compared to the other two large energy producing countries, which also have world scale fossil fuel reserves, Indonesia’s reserves and production of fossil fuels are noticeably much smaller. Indonesia owns the world’s largest geothermal reserves, but the reserves (of about 28 GW) are not well developed and they are also small in comparison to our future demand for electricity.

The third factor is technology. Russia has developed and owns technologies required for oil, gas, and coal exploration, exploitation, processing and transportation. The country’s energy companies (Gazprom, Rosneft, SUEK, etc.) are among the biggest within the industry in the entire world. Russia is the pioneer of development of nuclear power plants and is one of the largest producers of hydroelectricity (with Sayano-Shushenskaya, Krasnoyarsk, Bratsk, etc.). Canada has similar strong technological capabilities. On the other side, Indonesia is still largely dependent on imported technology to operate the long cycles of its energy development activities; studies, exploration, to final use.

Finance, as the fourth factor, is one of Indonesia’s weak points. The country is still relying on foreign direct investments and overseas loans to develop its oil and gas industry (upstream to downstream), electricity (generation to distribution), renewable energy (geothermal to waste energy), and so on. The domestic financing capacity, although increasing, is too small to catch up with the growing demand for energy projects planned for the country.

When it comes to considering challenges to energy security, Indonesia seems to have larger ones. Different from Russia and Canada, which already have reliable energy services, we have to work harder to meet our long unfulfilled energy demand.

The jobs include accelerating the development of oil, gas and electricity infrastructure particularly needed to supply regions outside Java.

Compared with the two others, we are geographically closer to giant energy nations (China, India) actively seeking energy from many sources. Thus, our priority to meet domestic energy demand is under pressure, both internally and externally. To put it simply, our energy security is more vulnerable or much more fragile than other large energy exporters.

Taking geographic advantage (relative to Canada) and an old history of cooperation, we might collaborate with Russia to strategically watch Asia’s energy market and further develop our domestic energy sector.

The writer is energy policy analyst with National Development Planning Agency (Bappenas).

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