POWER PLAY

Indonesia 2018 | ENERGY & MINING | INTERVIEW

TBY talks to Ignasius Jonan, Minister of Energy and Mineral Resources, on the importance of infrastructure to the country, its renewable energy efforts, and working to reduce the generation imbalance in the country.

Ignasius Jonan
BIOGRAPHY
Ignasius Jonan was appointed Minister of Energy and Mineral Resources in October 2016. Prior to this, he served as the Minister of Transport. Jonan was previously a banker and chief executive of state railway company PT Kereta Api Indonesia. He holds a MA in international relations from Fletcher School of Law and Diplomacy.

What are the main issues in the Indonesian energy sector, and how would you summarize your approach to those issues?

We cover electricity, oil, and gas from upstream to downstream through retail and also mineral resources through mining. The sector is one of the sources of the future growth of the country. We have to be a pioneer in many areas to increase opportunities for the expansion of the economy. One of the key issues is infrastructure. In many areas of Indonesia, we see that there is still a lack of infrastructure availability. The infrastructure must come first. Secondly, the reality of the lowest cost energy is important. My attitude toward the sector is that the lowest cost of energy is essential, which is a key competitiveness of the country. For example, if the electricity tariff is much higher than many exporting countries, then our industrial product will be less competitive comparing to them. We try to make the electricity tariff as reasonable and affordable as possible.

What are the ministry's intentions with its new power purchasing regulations and the recent ministerial decrees that have modified those regulations?

The only goal for ministerial decrees is to clarify and speed up the process of electricity investment, such as an independent power producer. I understand some of the input that the ministerial regulations will limit the bankability of any independent power producer projects; however, we have explained that the business risk itself cannot be borne by the government. The business risk has to be borne by the power plant company, but the political risk and the government commitment risk are with the government.

How would you address the concerns regarding the ability for investors to invest in renewable energy projects?

Over the past 40 years, we have installed almost 5,000MW of renewable capacity. I have been in this office since October 2016, and we have committed and signed transactions for almost 500MW in this period alone. Therefore, people who complain about the tariff in my opinion are the people who are not able to compete. The national electricity company recently signed around 46 transactions for close to 300MW of renewable energy, so 11 of the investors may have backed off, but 53 have already signed. As long as companies match the technical requirements, then we have to compete with the price; Japan, China, Europe, or the US, it does not matter where it is made.

What is your strategy for making exploration and production more attractive for oil majors and smaller firms?

There has been no cancellation of exploration. As long as the oil price is around USD50, then it is difficult to increase exploration and production unless the government wants to give up much more. If it wants 10% of the split to go to the government, then many of the big players are interested, even the smaller operators. However, that is not the goal. At the USD50 oil price, I do not think the encouragement for increased exploration is significant except for shale oil and gas in US since the production costs are getting lower. For the traditional methods, especially offshore, I do not think it has the courage to increase production at USD50.

What do you see as the ideal role for the state in developing further electrical generation and distribution?

The government has a great deal to do in regard to helping reduce the generation imbalance and the price of electricity in the country, as the disparity between what people can afford and the cost is still significantly wide. For that issue, the President has suggested that as long as the private sector can afford to do the investment, then we will let the private sector do it so that we can subsidize the people who earn much less.