PRESIDENTS DELIVERY UNIT

FOR DEVELOPMENT MONITORING AND OVERSIGHT (UKP4)

TOWARD ZERO FLARING IN INDONESIA:

DEVELOPING POLICY ON GAS FLARE REDUCTION

GGFR STEERING COMMITTEE MEETING

World Bank Washington DC, 30 November 2011

INDONESIA 2020 (1/2)

OURTO
ANNUAL
TARGET OF
BUT IT HAS
BE A
GREEN 7%
GROWTH
ECONOMIC
GROWTH:
WITH SUPPORT
7%
FROM NATURAL
RESOURCES

INDONESIA 2020 (2/2)

OUR NATIONAL EMISSION
REDUCTION TARGET OF
26% from state funds

41% with international support

FROM
TO

2950 millions ton of CO2e

1761 millions ton of CO2e

Consistency

UKP4 MAINTAINS CONSISTENCY AND SYNCHRONISATION

Action Plan

369 Action Plans

Synchronisation

UKP4,
BAPPENAS &
MoF
4

ONE OF ENERGY ISSUES IN INDONESIA

PLENTY
OF GAS

LIMITED
SUPPLY TO
GAS MARKET

GAS FLARING
5

GAS FLARING MAP IN INDONESIA

Year 2008 estimated
about 270-350
MMCFD was flared,
equivalent to 10% of
annual Indonesian
consumption (36
bcm in 2009.
Indonesia ranked #
7-10
Year 2009 estimated
357.5 MMSCFD,
equivalent to $500
million in lost
revenues including
lost government
share
Source: National Geophysical Data Center & The World Bank
6

WHY GAS FLARE MATTERS

Flared gas will help meet
increasing domestic demand for

gas along with Indonesias rapid

Black Carbon emitted

during flaring increases the
warming effect of flaring

economic growth

Indonesia venting and flaring

adds 17 million tons CO2 to
atmosphere every year and
wastes million dollars of energy
resources
Flared gas utilization will also help reach the
emission reduction target of 26% up to 41%
by 2020

OUR POLICY INSTRUMENT

PLENTY OF
GAS

LIMITED ACCESS
TO GAS MARKET

ZERO
FLARE
REDUCTION
POLICY
GAS FLARING

GAS FLARING MONETIZATION

With assistance from GGFR, the

Policy Snapshots:

instrument aims at addressing:

Recovery gas flare target is 3060% per year

Disparity of gas flaring financing

across Indonesia so that it will all be

Zero flare by 2025 as part of EMR

action plans

economically viable

Business perspective profitable

industrial practice as incentives
Sustainability on both levels:
Gas flaring
Environmentally-friendly energy

supply
Location: Banyu Urip Field, East Java

Case in Point:
PHE Offshore North
West Java (~zero
flare since 2009)

EXSISTING LEGAL AND REGULATORY FRAMEWORK

Impact

High

GGFR assesement

No measurement,
Specific incentives
monitoring and
for project
reporting
development not
Un-defined
provided
Technology
No Flaring
selection
permits system
No mandatory requirements
for flared gas reduction
Unspecified

No single
regulatory
agency

Limitations
on gas flaring

High
Low

Easiness to implement
10

ROAD TO GAS FLARING MONETIZATION

Action Plans
1.
2.

3.

Progress
1.
2.

Acceleration and advancement of

ZERO FLARE policy
Stocktaking in oil fields across
Indonesia for potential gas
monetization
Acceleration of gas flare utilization for
environmental purposes, particularly
socialization of Clean Development
Mechanism (CDM) for CO2 reduction

Framework of regulation for gas flaring utilization has been drafted

Stocktaking has already been done in 2009: Indonesias current volume
total of flaring is 357,5 MMSCFD and the flaring sites are spread in 13 oil
blocks across Indonesia
11

UKP4s ROLE IN DEBOTTLENECKING:

ACCELERATING ZERO GAS FLARE POLICY
Nov 2010
1st

Vice Presidential (VP) Meeting on

National Gas Policy, we highlighted Gas
Flare Monetization (GFM)

Dec 2010
Minister of Environment (MoE)
responded to our letter, explaining his
positions on GFM and concerns
about CDM

UKP4 intervention

2nd

Government workflow

VP Meeting on
National Gas Policy,
we brought up
MoEs concern and
discussed potential
recommendations

Minister of Energy & Mineral Resources

responded to our letter, explaining his
progress on GFM and their continuing
cooperation with GGFR

Government
workflow

Feb 2011

Dec 2010

Mei 2011
3rd VP Meeting
also discussed
progress on flare
gas utilization
plan and policy
planning

Jun Sep 2011 Nov 2011

2011

2012
onwards

EMR Ministry cooperated with GGFR & successfully

completed 3 stakeholder workshops on flaring &
venting policy in Indonesia. EMR Ministry ready to
pass the drafted regulation soon.
12

National GHG Emission Reduction Action Plan

Launched on September 20th 2011

Presidential Regulation 61/2011

National Action Plan for GHG Emissions
Reduction (RAN-GRK)
implements targets of reducing GHG
emissions by 26% by 2020
Annex II: Supporting Activities requires
monitoring of the implementation of the policy
on reducing the volume of flare gas burning
over the period to 2014

13

Towards
Zero Gas
Flare
Indonesia

14

GAS FLARE REDUCTION PROGRAM 2025

Gradual decrease facilitated by 24 MMSCFD
gas utilization per year, resulting in total gas
flared of 28,33 MMSCFD and remaining gas
flared as minimum as 4,33 MMSCFD

Utilization channels:
LPG, CNG, Gas Lift, and
Reinjection

Year

Source: EMR Ministry

15

PROJECTED POLICY OUTCOMES

TOTAL OF POTENTIAL FLARED GAS REDUCTION
Year 2009
Total current flared gas:
357.5
Utilization:
183.6
Remaining flared gas:
173.9

Source: EMR Ministry

16

2011 MONTHLY FLARED GAS TRACKING

BY NATIONAL OIL AND GAS IMPLEMENTING BODY

Cumulative Flared Gas [MMSCFD]

310.00

281,5

300.00

MMSCFD

290.00
280.00
270.00
260.00
250.00
240.00
JAN

FEB

MAR

APR

MEI

JUN

JUL

AGT

SEP

OKT

NOV

DES

17

ATTRACT THE INDUSTRIES

Provides
Economical as
well as
Environmental

Incentives

18

CASE IN POINT
PERTAMINA HULU
ENERGI OFFSHORE
NORTH WEST JAVA
(PHE ONWJ)
Zero Gas Flare
Best practice in Indonesia, so far

19

Source: PT Pertamina

Spans from North of

Cirebon to Seribu Islands

Pertamina Hulu
Energi Offshore
North West Java
(PHE ONWJ) is the
operator of this
PSC, transferred
from BP in 2009

11
1
3
171

Oil Platforms & Central Plant

Floating Storage Offloading Unit
Onshore Receiving Facilities
Normally Unmanned
Installations

Facilities include
670 wells, 170
piers, 40 refineries
& service stations,
and 1600 km
underwater pipes

ZERO FLARE PRACTICE IN INDONESIA

PHE ONWJ
CENTRAL PLANT

Very MINIMUM flare

almost unnoticeable

Source: PT Pertamina

ZERO FLARE PRACTICE IN INDONESIA

PHE ONWJ
FLOATING STORAGE
OFFLOADING UNIT
1 Million Barrel per Day

ZERO
FLARE
Source: PT Pertamina

ZERO FLARE PRACTICE IN INDONESIA

CILAMAYA ORF (ONSHORE RECEIVING FACILITIES)
Zero Flare as a Necessary Practice
Through Vent Recovery Unit
Unplanned Shut-down as a Catalyst
Low Shutdown Low Flare
Low Flare Better Oil Production

Highlights:
Zero Flare as an Economic
Company Strategy
Emission Reduction as one of the
Key Performance Indicators,
formally in 2011

Source: PT Pertamina

Location: 6 1431.49202 S, 107 3526.08716 E

ZERO FLARE PRACTICE IN INDONESIA

PHE ONWJ

ONSHORE RECEIVING

Potential Floating Storage

FACILITY (ORF)

Receiving Unit (FSRU) Site

Pipes for Gas Power Plant

(flare gas utilization)
Source: PT Pertamina

UKP4s NEXT STEPS FOR ACCELERATING ZERO FLARE

Nov 2010
1st

Vice Presidential (VP) Meeting on

National Gas Policy, we highlighted Gas
Flare Monetization (GFM)

UKP4 intervention

Next
Steps
in 4
Feb 2011
2012
2nd

VP Meeting on
National Gas Policy,
we brought up
MoEs concern and
discussed potential
recommendations

Dec 2010

Strategically
select and integrate
Minister of Environment (MoE)
responded
to our letter, explaining his
GGFRs
recommendations
into the
positions on GFM and concerns
CDM
KPIabout
of all
related ministries

2012 through
the Presidential
Dec 2010
Minister of Energy & Mineral Resources

Directives,
particularly:
responded
to our letter, explaining his

Government
workflow

by early

progress
on GFM andRegulation
their continuing on
Issue
Ministerial
cooperation with GGFR

Gas Flaring Policy by mid 2012

Government workflow

Mei 2011
3rd VP Meeting
also discussed
progress on flare
gas utilization
plan and policy
planning

Align supporting andNext

relevant
Steps in
6

related
Nov 2011
Jun policies
Sep 2011 from
2011by the end of 2012

2012
ministries

Implement
fewwith
pilot
projects
EMR
Ministry cooperated
GGFR
& successfully
completed 3 stakeholder workshops on flaring &
bypolicy
the end
of 2012
venting
in Indonesia.
EMR Ministry ready to
pass the drafted regulation soon.
25

MOVING FORWARD

UKP4

Provide
Umbrella
Policy

Detail
Program/
Action Plan

Progress
Tracking

Human
Capacity
Development

26

PRESIDENTS DELIVERY UNIT

FOR DEVELOPMENT MONITORING AND OVERSIGHT
(UKP4)

THANK YOU
GGFR STEERING COMMITTEE MEETING
World Bank Washington DC, 30 November 2011

APPENDIX
Onshore

Offshore

All

Median block size (mmscfd)

1.8

7.3

3.6

Share of 5-largest flaring blocks in total flaring

66%

76%

46%

Share of 5-largest flaring blocks in oil prodn

13%

73%

22%

Blocks flaring <5mmscfd

21
8
29
MIGAS data (2004) reported in GGFR Associated Gas Survey (2006)

28

Existing legal and regulatory framework (1)

by GGFR & Team

The format for the summary follows the framework laid out by DG MIGAS
Regulatory agency

No single regulatory agency. MIGAS, BP MIGAS and

Ministry of Environment all have limited regulatory
responsibilities with regards to gas flaring

Technology
selection

General obligation to use environmentally-friendly

technologies

Limitations on gas
flaring

PSC requires associated gas is utilised if economic, but

no further detail is provided and this does not appear to
be applied in practice.
BP MIGAS may take associated gas that is not utilised for
free
Environmental regulations specify minimum opacity for
flared gas and prohibit venting except for temporary and
operational exclusions defined in Regulation 13/2009

29

201
1
Eco
nomi
c
Con

Existing legal and regulatory framework (2)

Flaring permits

No formal permitting system appears to be in place

Mandatory
requirements for
flared gas
reduction

All routine and continuous flaring to be eliminated by

2025 (in accordance with GOGII)

Incentives for
project
development

No specific fiscal or PSC incentives are provided for

flared gas utilisation projects
There is uncertainty over the allocation of revenues
from sales of CERs through the CDM

Measurement,
monitoring and
reporting

MIGAS collects data on flaring by company, but

volumes are mostly estimated and appear unreliable
Operators are obliged to report emissions from
flaring (and other sources) to Ministry of
Environment

30

201
1
Eco
nomi
c
Con