Foreign Investors Abandon Jokowi’s National Strategic Projects (PSN)

Jakarta, CNBC Indonesia – The government of President Joko Widodo (Jokowi) has a number of priority projects, namely the National Strategic Project (PSN). This PSN list is contained in Presidential Regulation (Perpres) Number 3 of 2016 concerning the Acceleration of Implementation of National Strategic Projects.

Most recently, this regulation was revised into Presidential Regulation Number 109 of 2020 concerning the Third Amendment to Presidential Regulation Number 3 of 2016 concerning the Acceleration of Implementation of National Strategic Projects.

However, a number of foreign companies have decided one by one to leave President Jokowi’s ‘proud’ project. A number of projects, such as the oil and gas sector (oil and gas) and petrochemicals were abandoned by foreign investors.

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

1. Deep Sea Gas Project

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

Initially, the Chevron Indonesia Company (CICO) was the party managing this IDD project. However, 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.

An Italian oil and gas company, namely ENI, is reported to be replacing Chevron’s position in managing the IDD project. This was also confirmed by the Minister of Energy and Mineral Resources (ESDM), Arifin Tasrif.

According to Arifin, the process of transferring IDD project management 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 on Saturday (13/5/2023).

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 thousand barrels of oil per day (bpd).

The IDD project consists of two gas hub projects to be developed, namely Gendalo and Gehem hub. This project was originally planned to be operational in 2025. However, this project has been set back 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. The Dutch company, Shell, decided to leave this project by selling its 35 percent Participating Interest (PI).

Shell’s exit from the Masela Block project has prompted the government to encourage state-owned oil and gas companies, namely Pertamina, to enter and take 35 percent of Shell’s participating interest. Currently, the government is still waiting for confirmation from Pertamina to join the Masela Block.

Arifin targets the process of taking over Shell’s participating rights in the Masela Block by 35 percent by Pertamina targeted to be completed in June 2023.

According to Arifin, after the acquisition process is complete, Pertamina will become Inpex’s partner in managing the jumbo block. It is known that Inpex still holds 65 percent 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 already be partners, there will already be a new consortium,” said Arifin.

Arifin said Pertamina would later enter into 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 thousand barrels of oil per day.

This project is said to be a ‘giant’ because it is estimated to cost up to US$19.8 billion or around Rp.293.9 trillion (assuming an exchange rate of Rp.14,844/US$). The managers of this block, both 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 investor is Air Products and Chemicals Inc., a petrochemical company from the United States (US).

The decision to leave the giant US company was conveyed in a letter to the Indonesian government.

Air Products has chosen to discontinue 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, coal will be supplied from PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia.

PTBA Main Director, Arsal Ismail, explained that Air Products 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 for that reason, maybe this is still in process. They may have their own reasons. It will be at the Ministry later, who can explain in more detail,” Arsal said when met in Jakarta, Thursday (9/3/2023) then .

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

Arifin Tasrif said that currently Air Products is focusing on working on a hydrogen project in the US. This follows the provision of subsidies from the US 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 its use,” said Arifin when met at the Ministry of Energy and Mineral Resources Building, Friday (17/3/2023).

According to Arifin, the Inflation Reduction Act (IRA) provides cheap subsidies for the development of hydrogen projects so that many investors divert 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 PSN was the lack of common ground for economic value and business model between Air Products and the 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,” said Ridwan when met at JCC Senayan, Jakarta, last Tuesday (21/3/2023).

(were/were)