Indonesia: Resources and Their Value
For the successful development of their civilization, people rely on a variety of resources, many of which come from oceans and seas. There are four main types of marine resources: biological, physical, marine energy, and non-extractive ones. Biological resources are used for food, whereas other types provide people with energy and other valuable supplies. Some regions of the world are rich in resources, and others are poor or cannot exploit them appropriately. The present essay will demonstrate the physical marine resources of Indonesia as one of the main sources of the region’s energy and profitability.
Indonesia occupies an important place among the world’s global mining industry players. This country produces such vital resources as nickel, tin, gold, and copper. Apart from that, the Republic of Indonesia is one of the largest exporters of thermal coal in the world. Global mining organizations tend to rank Indonesia highly in relation to mineral and coal forecasts. At the same time, the evaluation of the country’s investment climate and the mining policy regime are not exclusively positive. There have been hopes that the Mining Law and its set of regulations would present investors with the essential regulatory certainty to stimulate new investments and reinforce Indonesia’s place as the major player in the mining sector. Still, over nine years have passed, and the country has not realized its mining investment potential yet. The long-standing contract-of-work framework for foreign investment was replaced with a modern licensing system pertinent to all investors, including tendering procedures for authorizing licenses.
In 2012-2013, when the global coal price declined, Indonesia escalated its production. One of the reasons was that there was a strong demand for this resource from coal-fired plants in different countries, especially in India and China. In 2014, even though the government tried to limit production increases, thermal coal production lowered only slightly to 458 million tonnes. In the next year, Indonesia experienced a considerable decline in thermal coal production. In 2016, the government anticipated a rise in thermal coal demand due to the construction of new coal-fired power plants. Thus, the production of this resource was increased to 419 million tonnes. The outcomes surpassed the target by 3.6% because of the considerable price increase in the second half of 2016. The continuous advancement in coal production is associated with the growing demand for this resource. In particular, coal is used for power plants and electrifying.
What concerns other resources produced by means of mining, they have not undergone considerable changes. The production levels of nickel, copper, and gold have hardly altered in the most recent years. Still, some crucial events need to be noted. A significant issue event in this respect was concerned with the increase in copper production following the delays in export permits that occurred in 2014. In 2016, the production of gold grew by 20%, largely because of higher prices on this metal. On the contrary, the production of tin decreased by 63% due to the government’s attempts to restrict export quotas in order to reserve depletion and manage illegal mining. With the new regulations issued by the country’s government, it is expected that the production of copper and tin in the nearest years will decrease.
Oil and gas
This industry has undergone many changes over the past five years. The major reason for such volatility is that oil prices are sensible due to global economic and geopolitical considerations. In Indonesia, the investment in the gas and oil industry constituted approximately $10.3 billion in 2017. According to the government’s data, this was the lowest investment in the last ten years. It is noted that in 2018, the prices of oil are expected to rise. Still, the contribution made by this industry to the state revenue has decreased considerably from 14% in 2014 to 3% in 2016. In 2017, the contribution recovered to 5%. In 2018, the target was 4.2%, which will enable the reservation of space for price volatility.
Despite the successful work of the oil and gas industry in Indonesia, some challenges are still reported. In particular, there is a problem of “a lack of new reserve discoveries and reserve depletions.” Due to this issue, many working areas were closed in 2016-2017. However, despite any difficulties, Indonesia is a highly committed member of the Organization of the Petroleum Exporting Countries (OPEC). In 2008, Indonesia was forced to suspend its membership, but it rejoined OPEC in 2015. Indonesia is one of the world’s top 20 oil producers with 3.7 billion barrels of oil reserves. The country is ranked 10th in the global gas producers list with 102 Trillion Cubic Feet of proven reserves. Also, Indonesia holds 15th place in the world and 3rd place in the Asia-Pacific region on a reserve basis.
The Use of Resources and Export
The resources are mainly used for domestic purposes. Indonesia is also known to export some of its resources, but this practice has undergone several major changes over the past few years. In 2017, a ban was imposed by the government on semi-processed metal ore exports. Still, the ban was not expected to influence the global prices on copper because China had ample metal stockpiles. In 2014, Indonesia announced a partial ban on ore shipments in order to make miners build smelters and process ore locally. The full ban, covering not only copper ore but also iron, zinc, lead, and manganese concentrates, was issued at the beginning of 2017. The restriction presupposed that only those metals that have been fully processed could be exported.
Several months after posing the ban, the government decided to lift it partially when it realized that the restriction had not brought the expected boost in the domestic economy. The country’s mining industry leaders complained that they were losing revenues due to the ban on exports. As a result, the government changed the regulations by allowing companies to export mineral ore and other mineral concentrates on condition they can demonstrate progress toward smelter development. Thus, it is relevant to note that the whole of Indonesia is rich in physical marine resources. It needs to improve its export schemes in order to bring benefits to the domestic economy.