Impact analysis of natural gas policy in Indonesia

ABSTRACT

Becoming a net importer of fuel oil has encouraged the Government of Indonesia optimizing the utilization of natural gas energy production. Increasing natural gas domestic usage has raised the potential wide impact on the economy. This paper investigates the impact of natural gas policy regarding the energy balance and national road map of natural gas infrastructure for the year 2014–2030. Applying the dynamic computable general equilibrium model, four scenarios are constructed—business as usual, declining existing supply, increasing potential supply, and energy substitution into four alternative sectors. The economic cost of relying on existing exploration causes natural gas imports to increase and the economy to slow down. Developing natural gas explorations is therefore required. The energy substitution in the electricity sector shows significant results based on both economic and environment indicators. The impacts however are varied depending on the type of energy, the magnitude, and the sector that is intervened.

KEYWORDS:

• Dynamic CGE model
• energy substitution
• environment
• Indonesia
• natural gas policy

Acknowledgments

The authors would like to thank Perusahaan Gas Negara (PGN) for allowing them to use the main outcomes of the study on the impact of domestic utilization of natural gas on the national economy.