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From Kerosene to LPG Conversion

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From Kerosene to LPG Conversion Providing Cleaner Energy Access for Indonesia: Case Study from Kerosene to LPG Conversion Practitioners Workshop on Energy Access for Urban and Peri-urban Poor ESMAP – Cities Alliance – World Bank Washington D.C, 7-8 May 2012 Washington, May 2012 As Indonesia’s integrated Oil, Gas and Petrochemical Company, Pertamina has strong presence in both Domestic & Regional Level Pertamina’s Scope of Business Upstream Refinery Shipping/Piping Depot Transportation Gas station Upstream • Producer of oil and gas domestically and overseas Downstream • Refining • Supplier for geothermal energy • Fuel business (kerosene, HSD/Diesel/MFO, etc) for industry • Gas transporter & trader • Special fuel business for retail (PertaminaDex, Pertamax/PertamaxPlus) • Aviation business Corporate • Lube base and Lubricants business • LPG business Employees • Petrochemical business 15,190 persons • Responsible for distributing fuel for Public Service Obligation Subsidiaries & Affiliates (PSO), such as kerosene, gasoline, HSD • Executor for kerosene conversion to LPG 19 Subsidiaries 13 Affiliates Page 1 We See the Growing Importance of Renewable Vision To be a world class national oil energy company Mission To carry out integrated core business in oil, gas, & renewable based on strong commercial principles Value Clean; Competitive; Confident; Customer Focus; Commercial; Capable Page 2 Indonesia’s energy mix for renewable energy will increase around 4.2% to 9.4% by 2030 Liquids Natural Gas Coal Others Renewables 2010 2012 2025 2030 13.9% 5.5% World total 33.2% 6.6% 30.0% 11.2% consumption 27.9% 27.0% 22.1% 22.5% 3.8% 5.2% 7.6% 26.0% Indonesia’s 39.0% 9.4% Energy Mix 33.0% 30.0% 27.0% 19.0% Source: EIO 2011, EIA Page 3 Pertamina’s clean energy initiatives will contribute in achieving Indonesia’s energy mix target Pertamina’s Scope of Renewable Business Upstream Downstream Kerosene to LPG Conversion Compressed Natural Gas Algae-derived Geothermal for electricity Biofuel Page 4 Upstream Downstream Kerosene to LPG Conversion Compressed Natural Gas Algae-derived Geothermal for electricity Biofuel Page 5 For upstream sector, Pertamina’s geothermal installed capacity will increase around 24% (CAGR) in the next 5 years Indonesian N PERTAMINA THAILAND Potential : PHILIPPINES Installed Capacity (MW) 28.99 GWe 500 Km 962 CAMBODIA Lahendong 837 512 Sibayak 402 402 Sarulla 2012 2013 2014 2015 2016 BRUNEI Kotamobagu Medan MALAYSIA Hululais Geothermal Reserves (MW) 1,565 MWe SINGAPORE Manado 1.905 Lumut KALIMANTAN 1.645 9,562 MWe 1.520 Balai 1.240 1.320 SULAWESI MALUKU IRIAN Ulubelu JAYA PAPUA Tanjung Karang 2,850 MWe NEW GUINEA Semarang Bandung 350 MWe 2012 2013 2014 2015 2016 Patuha JAVA BALI Kamojan TIMOR 5,331 MWe Salak NUSATENGGARA PERTAMINA Joint Operation Darajat Karaha Wayang Total Installed Capacity in Kamojang Dieng Bedugul Indonesia : Bodas Windu 1.194 MW Installed Capacity 1 USA : 2,544 2 Philippines : 1,931 3 (MW) Page 6 Upstream Downstream Kerosene to LPG Conversion Compressed Natural Gas Algae-derived Geothermal for electricity Biofuel Page 7 Biofuels development in Pertamina will be sequenced along three stages Own biofuel production Grow 2G platform (if technology develops) and/or further roll out 1.5G technology Develop advanced 1.5G (Green Diesel) leveraging same feedstock or improved ones Wave 3 Establish domestic production with proven 1G technologies and • If 2G matches 1.5G available feedstocks Wave 2 economically Technology flexibility • As 1.5G matches 1G economically Wave 1 Feedstock flexibility • Meeting tighter fuel standards • Opening opportunity to export internationally Now 2012-2013 2019-2020 2030 Improved biodiesel1 characteristics Biofuel products Bioethanol, As well as Algae based Hydrotreated Biodiesel FAME/Biodiesel Biofuel (3G) (Green Diesel) Biofuel’s share ~1% ~9% in Pertamina product mix Source: Biofuel Strategy Pertamina-BCG, 2009 Page 8 Current Condition: Unsustainable Biofuel Feedstock Supply presents the biggest obstacle in Biofuel Implementation … Pertamina’s Biofuel Sales 2009-2011 We have identified In 000 KL the following issues Possible solution Gov’t Quotas Lack of feedstock • Negotiate better Realization 26,714 supply subsidy scheme to Government Volatile feedstock price • Take equity in plantation 17,870 to reduce sensitivity to CPO price fluctuations -91% Constraint on 1G biofuel • Emphasize biodiesel and handling & market bioavtur which Pertamina acceptance already implemented in lab scale 8,000 4,461 “Optimizing biofuel processing technology from upstream to downstream is very important to meet 2,524 2,329 efficiency and to reduce the price of biofuel” Evita Legowo – Head of Oil and Gas Directorate, Energy Ministry 2009 2010 2011 Page 9 With the limited technology available and the process of collecting raw materials, Pertamina is projected to begin the use of non-food biofuel conflicting (lignosel, Algae) in 3,2 2020 3,1 2,9 Projected Biodiesel Demand Indonesia 2,8 2,7 Million KL 2,5 1,7 Lignosel, Algae Green Diesel FAME 1,6 1,5 1,5 1,3 1,4 1,4 1,5 1,2 1,3 1,4 0,6 0,9 0,9 0,5 0,5 0,5 0,6 0,6 0,8 0,5 0,5 0,3 0,3 1,4 1,5 1,5 0,3 0,4 0,0 0,3 1,2 1,3 1,3 0,3 0,8 0,8 0,9 0,9 0,9 0,6 0,6 0,5 0,5 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Product Upstream Refining Local Market Export Market Green Crude Palm Oil Domestic Europe Diesel • JV in plantation demand (ARA Market) (from CPO) • Potential partners : PTPN IV & PT SMART Tbk Green Algal - Oil Domestic Europe Hydrotreated Plant Diesel • Join-research w/ LIPI (strain) demand (ARA Market) (from Algae) • Join-research w/ BPPT (P.bioreactor) • Study in Existing Facilities • Join-research w/ ITB (Recovery) Refinery Bio avtur Coconut Oil Local Airlines European Airlines • Offtake in feedstock • Potential partner is Pacific Easten Coconut Utama (Lippo Group) Bio ethanol Cassava Molasses Flex Plant Domestic • Offtake in feedstock • JV in ethanol plant Demand • Potential source is importing from Vietnam & • Potential partners are Thailand or local supplier Medco and Molindo Page 10 Upstream Downstream Kerosene to LPG Conversion Compressed Natural Gas Algae-derived Geothermal for electricity Biofuel Page 11 Pertamina also support government mandates to win the compressed natural gas (CNG) conversion programme with conversion target as much as 72% public transport will be converted by the end of 2014 Legend : Key Success Factor Blue : Conversion Year 2012 Green : Conversion Year 2013 Red : Conversion Year2014 1 Continuity of supply of natural gas. 2 Availability of land close to the source gas for the development of online CNG station Jayapura 3 Support the government in the Papua provision of converter New Guinea kit. 4 CNG selling price adjusted to the 35% 62% 72% escalation of gas prices (raw material). Gas supply 33 mmscfd 75 mmscfd 97 mmscfd 5 Public acceptability of CNG Unit converted 46,777 vehicles 107,980 vehicles 136,855 vehicles Mother Station 11 Unit 26 Unit 38 Unit Daughter Station 36 Unit 82 Unit 105 Unit Tube trailer 179 Truck 408 Truck 527Truck CNG is dedicated to public transport Page 12 Source : Permen ESDM 19/2010, materi presentasi wapres 2012 Upstream Downstream Kerosene to LPG Conversion Compressed Natural Gas Algae-derived Geothermal for electricity Biofuel Page 13 For many years kerosene has been heavily subsidized by the Government of Indonesia (GOI) as the primary fuel for households and SME. 13 6.0 12.3 11.7 11.8 11.9 • In 2007 the Kerosene subsidy reached USD 4.1 12 11.4 5.2 5.5 Billion. It became a big burden on the 11 5.0 10.0 9.8 Government’s budget. 10 4.5 4.1 9 3.8 4.0 • Unfortunately there were indications of misuse 8 7.8 3.5 of subsidized kerosene bu unsubsidized 7 3.0 industries, mixed with gasoline as well as 6 smuggled to other countries. 2.5 5 2.0 2.0 4 1.5 1.6 • The Indonesian Government launched several 1.3 1.4 3 1.5 initiatives to reduced fuel oil consumption and 2 1.0 the Kerosene to LPG conversion Program is 1 0.5 one of its biggest initiatives. 0 0.0 2007 2008 2009 2010 2011 2012 2013 2014 Kero Subsidy (USD Billion) Kero Volume (millions KL) Page 14 Intoduction LPG was chosen as the alternate fuel due to several main reasons: 1. Based on it’s calorific value, the subsidy for LPG is much lower than kerosene. 1 liter of kerosene equals to 0.4 kg of LPG. 2. LPG is a cleaner burning fuel than kerosene. 3. Indonesia has many potential huge gas reserves compared to kerosene, which 30% of it is imported. 4. In terms of infrastructure, LPG was the most ready to be implemented compared to other fuel alternatives such as coal and natural gas. 5. LPG subsidization has been successfully implemented in neighboring countries such as Malaysia and Thailand. Page 15 Methods – Preparation Stage • In 2006, GOI leader (former Vice President Jusuf Kalla) arranged the program to be implemented in a very short period of time (3 years compared to 6 years in Pertamina’s proposal). • His strong leadership urged this program to commence in only 8 months after a simple feasibility study and one-month market trial conducted by Pertamina in various secluded areas in Jakarta. • The Ministry of Energy and Mineral Resources has been taken into account as the official government representative to lead this program and Pertamina as the single NOC in Indonesia to be finally appointed as the executor of the program. • In May 2007, the program was launched in Jakarta.
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