In January 2015, the Indonesian government launched the '35 GW Programme' to increase power generation capacity through a new wave of power plants across the country. The programme has added strategic significance amid the risk of looming power shortages across the country. Indonesia's power demand is expected to double from today to 2025. A massive amount of new power plants are urgently required.
It has been 12 months into the programme. Already 10 GW of projects have been awarded to Independent Power Producers. But awarding is one thing, building another. Previous Indonesian power programmes have historically been prone to extensive delays. Crash Build I was initiated in 2006, targeting 10 GW of capacity additions by 2010. Crash Build II started in 2009 and had a target of completing 17 GW by 2018. Both programmes have struggled to progress to schedule or meet scope. Crash Build I in its latest guise is around 85% complete to date while Crash Build II is less than 5% complete. This begs the question of whether the 35 GW programme can be any different?
Given the challenges to building power plants in Indonesia, market players need to understand which projects offer the best chance of being realised, what the opportunities are and how to mitigate the obstacles in their way. It is imperative for players to be able to navigate the right bureaucratic channels and have a thorough understanding of the implications of plant fuel type, in addition to land matters, fuel supply and transmission access.
Despite potential challenges the programme represents one of the biggest investment opportunities for Independent Power Producers globally. An estimated US$80 billion of capital is required. It therefore offers lucrative opportunities for players throughout the value chain - upstream producers, LNG and coal suppliers, EPC companies, power plant operators, and financial institutions.
For fuel producers, the programme will create a boost to the domestic fuel demand. Around 75 Mtpa of coal and 1,400 mmcfd of gas – of which 40% is estimated to be LNG (approximately 3.8 mmtpa) – will be required when all the proposed capacity is brought online. This offers opportunities for coal and gas producers across the country as well as international LNG suppliers. It is a particularly welcome boost for local coal suppliers given the slowing growth of exports.
Our full Insight report, Indonesia's 35 GW power programme: turning obstacles into opportunities, in addition to our comprehensive Asia-Pacific upstream outlook for 2016, is available for purchase on-demand or as part of our subscription service.
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