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(Feb 03, 2014) On January 28, 2014, Indonesia's legislature passed a new regulation on energy, designed to gradually end the existing fuel and electricity subsidies, stop exports of coal and gas, and increase the role of renewable energy in the country. (Tito Summa Siahaan, Indonesia Passes National Energy Regulation, Set to Raise Price of Fuel, Power, AMCHAM INDONESIA (last updated Jan. 28, 2014).) Minister of Energy and Mineral Resources Jero Wacik noted that the goal is to have oil be a maximum of 25% of total energy consumption in the country by 2025; in that year the plan is to have 23% of energy use from renewable resources, 30% from coal, and 22% from natural gas. (Yohanes Obor, DPR Passes National Energy Regulation, YOSEF ARDI NEWS (Jan. 29, 2014).) At present 42% of energy consumed in Indonesia comes from oil, and only 2% is derived from renewable resources. (Siahaan, supra.)

Without government subsidies, fuel and electricity prices will gradually rise over the next ten years. According to Herman Darnel Ibrahim, a member of the National Energy Council (the Dewan Energi Nasional, or DEN), an exact deadline for the end of the subsidies has yet to be set. (Id.) The National Energy Council was established by the government to formulate energy policy. (Tentang DEN [About the National Energy Council], DEN website (last visited Jan. 28, 2014).)

The provision specifying that exports of fossil-based energy sources, particularly natural gas and coal, will gradually be reduced is reportedly controversial. (Siahaan, supra.) The decision to eventually end such exports follows a similar decision now in effect for unprocessed minerals. (See Constance A. Johnson, Indonesia: Export Ban on Unprocessed Minerals Comes into Effect, GLOBAL LEGAL MONITOR (Jan. 23, 2014).)

In 2013, Indonesia earned about US$31.3 billion from oil and gas sales, with the proceeds largely going toward the $25 billion in energy subsidies. This year, the government expects to spend about $2 billion less for the subsidies. (Siahaan, supra.)

Author: Constance Johnson More by this author
Topic: Coal More on this topic
 Energy More on this topic
 Energy prices More on this topic
 Oil and gas More on this topic
Jurisdiction: Indonesia More about this jurisdiction

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Last updated: 02/03/2014