September 4, 2024
JAKARTA – The government launched an extensive program in 2007 to replace kerosene with liquefied petroleum gas (LPG) as the primary cooking fuel in homes. This kerosene-to-LPG conversion program was initiated with two goals in mind: first, to divert kerosene as an unsustainable target of government subsidies and second, to use kerosene for more worthwhile purposes, such as in aviation fuel.
The program has met most of its immediate objectives. As a result, homes in almost all regions nationwide now use LPG instead of kerosene.
Although the initiative succeeded in reducing kerosene consumption, it also had unforeseen implications, most notably a large increase in imported LPG, which has created new difficulties for Indonesia’s energy security.
The country has averaged around 2 million metric tons per year in domestic LPG production between 2019 and 2024, which is relatively steady. On the other hand, demand has increased dramatically from 7.8 million metric tons in 2019 to an anticipated 8 million metric tons by 2024.
LPG imports have also increased to close the widening gap between domestic production and consumption, yet this trend poses a threat to Indonesia’s current account deficit.
This raises the question of whether the kerosene-to-LPG conversion program is actually sustainable. Reducing kerosene subsidies was the program’s immediate goal, but it didn’t solve the fundamental problem of energy self-sufficiency. Rather, it just moved the problem from one fuel to another.
Despite significant domestic production, going back to kerosene is not a practical solution. LPG is widely accepted among the public since it is clean and convenient, and LPG stoves require little upkeep.
Furthermore, returning to kerosene would present serious logistical difficulties and annoy a populace that has become used to the advantages of LPG.
The government and various stakeholders have examined alternative options in an effort to curb the increasing reliance on imported LPG, and dimethyl ether (DME) has emerged as a viable alternative. DME is produced from coal, so it has the potential to improve energy independence by using the country’s plentiful coal deposits.
Unlike LPG, DME is a synthetic gas that burns efficiently and cleanly, making it a potentially useful substitute. Switching to DME is not without its difficulties, though.
Coal gasification, the method used to produce DME, is a labor- and capital-intensive process that needs a substantial initial outlay of funds. In addition, before DME is implemented widely, safety and economic issues regarding its transportation and storage must be fully resolved.
Natural gas condensate (NGC), a by-product of producing natural gas, is another option that is gaining popularity. NGC can be used in place of LPG with just minor adjustments to the current infrastructure, including LPG cylinders, and might also prolong the life of these cylinders, cutting waste and the need for new production.
It is also a safer option because of its lower pressure, which decreases the possibility of explosions.
In addition to lower logistics costs, a project piloting NGC use in areas like eastern Indonesia, where condensate is produced in large amounts at LNG plants like Donggi Senoro and Tangguh, might also serve as a model for wider national implementation.
Further, if NGC reduces LPG imports by just 1 million metric tons, the country could save around US$550 million each year.
Apart from DME and NGC, there is also high potential for creating compressed natural gas (CNG) networks in cities. Natural gas deposits are abundant in Indonesia, and CNG is a more economical, environmentally friendly fuel than LPG. Building a strong CNG network could also make use of locally accessible resources and drastically lessen the country’s reliance on imported LPG.
To guarantee comprehensive pipeline distribution and financial sustainability of CNG infrastructure, however, the success of this option largely hinges on effective public-private collaboration as well as with local communities.
The growth of biogas as a sustainable energy source is another important factor to take into account in a strategy to minimize LPG imports. Aerobic digestion of organic waste yields biogas, which provides a sustainable fuel substitute. Indonesia offers a lot of potential for producing biogas due to its extensive agriculture industry.
The government must consider the energy policy’s wider effects on both economic stability and national security. With the growing focus on sustainability and the shift to low-carbon energy sources, the global energy landscape is always changing, and Indonesia needs to modify its approaches to be resilient. This entails lowering its reliance on foreign-produced fuels while simultaneously boosting energy efficiency in all economic spheres and investing in renewable energy development.
Reducing LPG imports is not just an economic issue: It is a national security issue that affects Indonesia’s resilience to economic shocks, as well as the country’s environmental sustainability and energy security. The government needs to make its ultimate goals clear before it can deal with this issue in an efficient manner.
Is the primary objective to minimize overall reliance on imported energy, fulfill the current LPG demand or closing the current account deficit? Different methods and techniques are needed to achieve each of these objectives.
To meet the current LPG demand, for example, investments are necessary to boost capacity in local LPG production. If the ultimate goal is to eliminate reliance on LPG, transitioning to alternatives like DME, NGC or CNG requires a comprehensive approach that involves infrastructure development, public education and adoption incentives.
Conversely, if reducing the current account deficit is the primary goal, the government might give precedence to measures that yield the biggest economic returns in the shortest time, such as the prompt adoption of NGC or the accelerated increase of biogas output.
In sum, Indonesia’s journey to energy resilience necessitates a complex strategy that strikes a balance between social, environmental and economic factors. The government must have a forward-thinking plan that places a high priority on investments in renewable energy sources and reduces reliance on imported fuels.
By doing so, Indonesia will be able to better secure its energy supply, encourage economic expansion and support international efforts to tackle climate change. Acting now will prevent the increasing burden of LPG imports from becoming an unmanageable obstacle.