Indonesia's new energy minister says collaboration key to meet emission targets

Indonesia's newly appointed energy and mineral resources minister Bahlil Lahadalia told regional leaders that collaboration was key for countries to achieve their emission targets, especially for developing countries like Indonesia that have vast natural resources but lack the technology and funding to harness them.

"There must be synergy between developed countries that already have technology, with developing countries that have potential but do not yet have good technology, especially if they require sufficient capital," Lahadalia said this week at the Asia Zero Emission Community 2nd Ministerial Meeting in Jakarta.

Indonesia aims to meet its net-zero emissions goal by 2060, though at least one senior government official has told S&P Global Commodity Insights that this target could be met as early as 2055, or even earlier.

The event in Jakarta also marked Lahadalia's first reported international meeting since he took over as the country's energy and mineral resources minister Aug. 19, in a surprise cabinet shakeup made by outgoing president Joko Widodo in the final weeks of his term.

At his appointment ceremony earlier this week, Lahadalia said he will continue to optimize oil production and boost upstream investments in the country.

"We are making regulatory improvements for upstream oil and gas investments. What exactly should we improve? Should we offer sweeteners or other incentives to remain competitive with other countries? If we don't, we will fall behind those nations that are actively pursuing exploration," Lahadalia had said.

Lahadalia, who previously headed the country's Investment Coordinating Board (BKPM), added that he had been tasked by incumbent president Joko Widodo to optimize Indonesia's natural resource potential and production to increase state revenues and create more jobs.

"We will continue the good work initiated by the previous minister, Pak Arifin [Tasrif]. What has been done well, we will carry on; what is not yet perfect, we will improve; and what does not yet exist, we will establish for betterment. This is part of internal coordination," he said, adding that he also plans to develop the country's LPG industry to reduce imports.

Upstream incentives

Earlier this month, the Indonesian government enacted the new Gross Split Production Sharing Contract (PSC) through MR 13/2024, which allows more flexibility for the Energy and Mineral Resources Ministry to grant additional profit-sharing cuts to contractors.

The Energy and Mineral Resources Ministry had previously stated that contractors of conventional oil and gas projects could potentially receive cuts between 75% and 95%, compared to under 50% earlier.

Under the previous minister Tasrif, the ministry had said that the government is also working on refining several policies(opens in a new tab) – including revising government regulations related to upstream oil and gas taxation, and the exemption of indirect taxes, including property tax during the exploitation phase.

This comes as the country is striving toward its 2030 production target of 1 million b/d of oil and 12 Bcf/d gas by 2030 to meet increasing domestic demand despite grappling with declining output.

The country currently expects to produce 600,000 b/d of oil and 1.005 million boe/d of natural gas in 2025, according to its latest draft state budget, which was lower than its projection for this year – 635,000 b/d of oil and 1.033 million boe/d of natural gas.

To boost upstream activities, the Indonesian Petroleum Association told Commodity Insights that more exploration and the timely development of new fields were important.