Indonesia Briefing Bulletin – September Edition


Construction begins on Southeast Asia’s largest floating solar power plant in Indonesia

In early August 2021, the developer of the PT PJB Masdar Solar Energi (PMSE) plant announced the financial closure of the 145 MW Cirata floating photovoltaic solar plant in West Java. PMSE is a joint venture formed between Masdar, an Abu Dhabi-based renewable energy group, and PT PJB, a subsidiary of Indonesian state-owned electricity company Perusahaan Listrik Negara.

Construction of the plant has now started and is expected to be operational in November 2022. When completed, the plant will become the first in Indonesia and the largest of its kind in Southeast Asia.

The Indonesian government has set a short-term clean energy goal of producing 23% of energy from renewable sources by 2025 and 31% by 2030. In order to achieve this goal, solar power is expected to be the energy source with the most potential and relatively the fastest to develop. With solar panel prices falling 60% over the past 6 years, solar power has also become relatively more affordable and the Indonesian government is prioritizing its development and use in the country.

Senior Energy Ministry official Dadan Kusdiana said that although about half of the country’s estimated renewable energy potential of 417 GW may come from solar power, less than 0.1% of that potential has been used. In this context, Indonesia could turn to its 375 lakes or reservoirs to deploy floating photovoltaic systems and generate 28 GW of additional electricity to meet the country’s energy demand.

Indonesian regulator SKK Migas approves plans for Tangguh liquefied natural gas capture project

SKK Migas, Indonesia’s upstream oil and gas regulator, approved next stage of development of Ubadari natural gas field and Vorwata carbon utilization and storage (CCUS) at the Tangguh liquefied natural gas (LNG) plant in West Papua Barat, which is operated by British Petroleum and its partners.

Operators plan to inject 25 million tonnes of carbon dioxide (CO2) into the Vorwata reservoir to remove up to 90% of the CO2 associated with the reservoir which is currently being evacuated, and to provide additional gas production via recovery improved gas. This would make the Tangguh project one of the lowest greenhouse gas emission intensity LNG plants in the world.

The Tangguh project is also expected to generate an additional 1.3 trillion cubic feet of gas recovery from the Ubadari and Vorwata fields. Subject to any further approval by SKK Migas, the initial engineering and design of the two fields will be carried out in mid-2022, and the project is expected to start in 2026 after a final investment decision.

These new developments are in line with growing pressure on global entities to reduce CO2 emissions, as well as the Indonesian government’s efforts to meet its gas production aspirations and commitments to tackle climate change.

Indonesia and the United Arab Emirates (UAE) have started trade negotiations on a free trade and investment agreement between the two countries. The Comprehensive Economic Partnership Agreement (CEPA) is the first of such an agreement with a country in the Middle East, and it is also the UAE’s first with a country in Southeast Asia.

The digital economy, energy transition, spatial development and biotechnology are some of the key sectors to be discussed within the framework of CEPA, with the two countries seeking to facilitate reciprocal access to market products such as agricultural products and food, stainless steel, precious metals. and automotive products.

The proposal aims to increase bilateral trade tenfold from the $ 2.93 billion already recorded in 2020 and the two countries hope that a deal can be reached within a year.

The negotiation talks between the two countries follow the UAE’s announcement earlier this year to invest $ 10 billion in the newly created Indonesian sovereign wealth fund, with key projects in sectors such as infrastructure, tourism and agriculture – please refer to March edition of our newsletter who discussed it. In addition, the UAE also presents itself as a gateway to other Gulf countries and Africa, thus extending Indonesia’s access to other longer-term economies.

New project to convert gasoline motorcycles to electric motorcycles in Indonesia

In August, Indonesia launched a pilot program to convert gasoline motorcycles to electric vehicles. The project started with the conversion of 10 such motorcycles and aims to convert around 90 more by November of this year. Indonesian Energy and Mineral Resources Minister Arifin Tasrif said all motorcycles sold from 2040 will be electric while all new cars sold from 2050 will be electric vehicles.

Data from the Indonesian Automobile Industries Association shows the country had over 112 million motorcycles and 15 million cars in 2019 – and the government has set a target of 13 million electric motorcycles and 2.2 million electric cars by 2030.

The Gojek ridesharing app also previously announced its goal of making every car and motorcycle on its platform an electric vehicle by 2030.

The country’s plans for the move to electric vehicles go hand in hand with its plans to leverage its rich supplies of nickel laterite ore used in lithium batteries, fueling ambitions to become a global hub for the production of batteries and electric vehicles. , with the potential for cheaper and greener vehicles in the long run.

New Rules of the Central Bank of Indonesia on Minimum Loans for Micro, Small and Medium Enterprises

The Bank of Indonesia issued new regulations aimed at strengthening the role of micro, small and medium enterprises (MSMEs), increasing economic inclusion and unlocking financial access in the national economic recovery during the COVID-pandemic. 19. The new regulation, Bank Indonesia Regulation (PBI) Number 23/13 / PBI 2021 on Macroprudential Inclusive Financing Rationale (RPIM) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units, comes into force on August 31, 2021 and will be repealed in its entirety. an earlier regulation from 2015.

Under the new rules, banks are required to complete the RPIM in stages, with this ratio starting at 20% in 2022, 25% in 2023 and 30% in 2024. This can be achieved through inclusive funding in various forms, such as the granting of credit or direct financing, the granting of credit or financing through other financial institutions, public service agencies and / or commercial entities, as well as the purchase of securities, which contribute to the provision of funds and financing to MSMEs, MSME supply chains and low-income people.

With the demand for bank credit in the MSME sector, this is a step in the right direction for banks to act as a balanced intermediary in the financial system and for businesses to get the help they want. need to function and develop.

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