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Analysis: Bahlil appointed as head of downstream, energy resilience team
Tenggara Strategics January 25, 2025
Renegotiating fuel subsidies: Energy and Mineral Resources Minister Bahlil Lahadalia waves before the Twilight Parade at Pancasila Field, Military Academy, Magelang, Central Java, on Oct. 25. Bahlil unveiled a new fuel subsidy scheme combining goods subsi
President Prabowo Subianto has appointed Energy and Mineral Resources Minister Bahlil Lahadalia to lead a task force on acceleration of the downstream industry and energy resilience, which also has authority over marine and forest areas and even to impose sanctions on problematic parties. Some have expressed concern, however, about whether the task force will also prioritize the energy transition.
The new task force was established on Jan. 3, 2025, under Presidential Decree (Keppres) No. 1/2025 on the Task Force for the Acceleration of Downstream and National Energy Resilience. According to Bahlil, the government will prioritize 28 downstream commodities and intensify the minerals and coal, oil and natural gas, agriculture and forestry as well as the maritime and fisheries sectors to increase domestic value-added.
The task force reports directly to the President and is mandated to coordinate policy and regulatory frameworks across ministries, state agencies and regional administrations, define business priorities and establish standards, secure necessary funding and optimize state revenue generation for downstream development.
In addition, it can carry out land and maritime spatial planning, changes and utilization, as well as acquire and use land or forest areas to accelerate downstream processing and ensure energy resilience. It is also authorized to recommend administrative policies to cabinet ministers, agency heads and relevant officials whose actions hinder its goals.
The task force can also identify and recommend strategic downstreaming and energy resilience projects for financing by banks, nonbank financial institutions and/or the state budget. Bahlil has underlined that the task force would advocate for a downstream and energy resilience strategy that minimizes reliance on the state budget.
To accelerate Indonesia’s downstream development by 2040, the government has estimated a significant investment of US$618 billion (Rp 9.83 quadrillion). Downstream investments are expected to significantly boost the economy with a projected gross domestic product (GDP) growth of $235.9 billion and export growth of $857.9 billion. Furthermore, these investments are anticipated to facilitate substantial employment growth by creating over 3 million jobs.
The government’s downstream focus has yielded tangible results, as reflected in the performance of Indonesia's nickel production and exports of derivative products, mainly stainless steel. In 2023, the country produced 1.9 million tonnes of nickel, both finished and semifinished goods, accounting for 57 percent of global nickel production. The export value of nickel and nickel derivatives has surged from $780 million in 2018 to $6.8 billion in 2023.
Indonesia pursued its nickel downstreaming policy by banning nickel ore exports in January 2020, prompting a massive investment inflow to nickel smelters, mainly by Chinese stainless steel producers that need nickel as raw material. Investments in nickel processing have been concentrated in Central Sulawesi, Southeast Sulawesi and North Maluku, which have the country’s largest nickel deposits. Chinese investment in these areas has reached more than $30 billion.
The massive investment in nickel downstreaming, however, has also led to the massive development of captive coal-fired power plants (PLTA). The growth of domestic captive power plants (CPPs) has been remarkable, reaching an installed capacity of 15.2 gigawatts (GW) by mid-2024, almost three times the 5.7 GW recorded in 2019. CPP capacity is projected to increase to 17.1 GW by the end of 2024.
As part of the national commitment to achieving net-zero emissions by 2026 or earlier, the government is also committed to transitioning from fossil fuels to clean energy. Toward this end, the task force is advised to pay attention to developing the renewables downstream sector to reduce Indonesia’s reliance on imported component while creating jobs to boost activity in the sector.
Source: www.thejakartapost.comRelated Articles
