Economic implications of domestic natural gas allocation in Indonesia
International Journal of Energy Sector Management
ISSN: 1750-6220
Article publication date: 13 November 2018
Issue publication date: 15 May 2019
Abstract
Purpose
The purpose of the paper is to provide to a better scientific understanding of Indonesia’s domestic gas allocation policy and its effects on the national economy and to answer the question of what best priorities can be set in allocating the natural gas for the domestic market to maximize the benefits for the national economy.
Design/methodology/approach
The authors apply a Computabled General Equilibrium (CGE). The Social Accounting Matrix 2008 is used to calibrate the CGE Model. There are two scenarios proposed, each is simulated with certain percentage of gas supply curtailment (50 MMSCFD, Scenario A), (100 MMSCFD, Scenario B).
Findings
It is confirmed that government’s current policy to give priority to oil production is not the optimum way to maximize added value of natural gas to Indonesian economy. While oil production generates state revenue, it is industry and petrochemical sector that induces high economic impacts because of strong backward and forward linkages.
Research limitations/implications
Due to the limited data availability, it is assumed that the data on the SAM 2008 are valid for describing the structure of Indonesian economy.
Practical implications
The paper provides recommendation to the government to revise gas allocation policy by changing the rank of consumers’ priority.
Originality/value
This paper provides instruments to measure the impact of Indonesia’s domestic gas allocation policy. Finding the best hierarchy of consumer priorities is essential for maximizing added value of natural gas for the national economy.
Keywords
Acknowledgements
This work was supported by the Dutch Science Foundation under grant number C&B-NFP-PHD.10/14. The content of this article is based on Hutagalung’s PhD research conducted at CSTM University of Twente between 2010 and 2014.
Citation
Hutagalung, A.M., Hartono, D., Arentsen, M.J. and Lovett, J.C. (2019), "Economic implications of domestic natural gas allocation in Indonesia", International Journal of Energy Sector Management, Vol. 13 No. 2, pp. 424-449. https://doi.org/10.1108/IJESM-05-2018-0003
Publisher
:Emerald Publishing Limited
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