“Foreign Investment Abandons Indonesia’s National Strategic Projects under President Jokowi’s Administration | CNBC Indonesia”

Jakarta, CNBC Indonesia – The administration of President Joko Widodo (Jokowi) era has a number of priority projects called the National Strategic Projects (PSN). This list of strategic projects is also contained in Presidential Regulation No. 3 of 2016 concerning the Acceleration of Implementation of National Strategic Projects.

Most recently, this regulation was revised into Presidential Regulation No. 109 of 2020 concerning the Third Amendment to Presidential Regulation No. 3 of 2016 concerning the Acceleration of Implementation of National Strategic Projects.

But unfortunately, a number of foreign companies have decided one by one to leave President Jokowi’s “proud” project. Both from the oil and gas sector (oil and gas) and petrochemicals, projects in these sectors were abandoned by foreign investors.

The following is a list of PSNs left by foreign investors:

1. Deep Sea Gas Project

One of the National Strategic Projects abandoned by investors is the deep sea gas project or Indonesia Deepwater Development (IDD) in East Kalimantan.

Initially, Chevron Indonesia Company (CICO) managed this IDD project. However, several years ago Chevron announced that it would let go of the management of the IDD oil and gas field because it was considered uneconomical for the company.

It is reported that an Italian oil and gas company, ENI, will replace Chevron’s position in managing the IDD project.

This was confirmed by the Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif when he confirmed the matter.

According to Arifin, the process of transferring the management of the IDD project itself is expected to be completed by the end of May 2023.

“The IDD will make a decision later, God willing, at the end of May,” Arifin said when met at the ESDM Office, quoted Monday (8/5/2023).

The IDD project is quite interesting to develop because its gas production is estimated to reach 844 million standard cubic feet per day (MMSCFD) and 27,000 barrels of oil per day (bpd).

The IDD project consists of two gas hub projects that will be developed namely Gendalo and Gehem hub. This project was originally planned to be operational in 2025 but eventually suffered a setback to 2028.

2. Perpetual Gas Project in Maluku

The second strategic project that was also abandoned by investors was the Abadi Field Project, the Masela Block in Maluku. A Dutch company, Shell, decided to leave this project by selling its 35% Participating Interest (PI).

With Shell leaving the Masela Block project, the government is also pushing for the state-owned oil and gas company Pertamina to take 35% of Shell’s participating interest. Currently the government is still waiting for confirmation from Pertamina to join the Masela Block.

Arifin targets Pertamina to take over Shell’s participating interest in the Masela Block by 35% by June 2023.

According to Arifin, after the acquisition process is complete, Pertamina will later become Inpex’s partner in managing the jumbo block. Inpex itself is known to still hold ownership of 65% participating interest and is the operator of this block.

“We hope that in early June, there will be a decision in early June, there will be partners, there will be a new consortium,” said Arifin.

Arifin said that Pertamina would later enter on its own first in the process of taking over Shell’s participation rights in the Masela Block. Thus, it is not yet certain whether the state-owned oil and gas company will cooperate with other partners or not.

The Masela Block is estimated to have the potential to produce 1,600 million standard cubic feet per day (MMSCFD) of gas or the equivalent of 9.5 million tonnes of LNG per year (mtpa) and 150 MMSCFD of pipeline gas, as well as 35,000 barrels of oil per day.

The project is said to be “giant” because it is estimated to cost up to US$ 19.8 billion. The managers of this block, Inpex and their partners, will later build an onshore Liquefied Natural Gas (LNG) refinery.

3. Coal Downstream Project

The downstream coal project into Dimethyl Ether (DME) and methanol was also abandoned by foreign investors. The investors who withdrew were Air Products and Chemicals Inc., a petrochemical company from the United States.

The decision to leave the giant company from the United States was conveyed in a letter to the Indonesian government.

Air Products itself has chosen not to resume two coal gasification projects in Indonesia. Both are related to the DME project as a substitute for LPG in Tanjung Enim. Initially, Air Products worked with PT Bukit Asam Tbk (PTBA) and PT Pertamina (Persero). Second, the coal to methanol gasification project with the Bakrie Group company, where the coal will be supplied from PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia.

PTBA Main Director Arsal Ismail explained that Air Products itself had sent an official letter to the Indonesian government regarding the decision. However, he did not reveal in detail why Air Products had decided to leave the DME project, which was predicted to be a substitute for LPG gas.

“They have sent an official letter as a reason, maybe this is still in process. They may have their own reasons. It is at the Ministry later that they can explain in more detail,” Arsal said when met in Jakarta, Thursday (9/3/2023).

According to Arsal, his party will still be committed to running a coal downstream project in the country even without Air Products. Bearing in mind, the coal downstream program is an effort to support national energy security.

ESDM Minister Arifin Tasrif said that currently Air Products is focusing on working on a hydrogen project in the United States. This follows the provision of subsidies from the United States government for the development of clean energy projects.

“In America, with subsidies for EBT, there are more attractive projects there for hydrogen, because America is pushing for that use,” said Arifin when met at the Ministry of Energy and Mineral Resources Building, Friday (17/3/2023).

According to Arifin, with the existence of the Inflation Reduction Act (IRA), which provides cheap subsidies for the development of hydrogen projects, many investors have shifted most of their investment back to Uncle Sam’s country.

The Director General of Mineral and Coal (Dirjen Minerba) of the Ministry of Energy and Mineral Resources, when he was still serving as Ridwan Djamaluddin, said that one of the triggers for Air Products’ departure from the National Strategic Project (PSN) was due to the lack of common ground for economic value and also the business model between Air Products. with a consortium with PT Pertamina (Persero) and PT Bukit Asam (PTBA), as well as KPC.

“Yes (the reason is) the economic value. Air Products, another one that is the same as KPC. We will also facilitate a meeting with KPC. Basically the business model does not meet between the two parties. Our preparations going forward must be more detailed,” Ridwan said when met at JCC Senayan, Jakarta, Tuesday (21/3/2023).

(wia)