Indonesia Journey to Net Zero Emission

Indonesia understands that tackling climate change is a crucial component of any country's development strategy. The planning for both national and local growth should take climate change into account. Programs for sectoral and cross-sectoral development should have taken climate change into consideration because it is expected.

In February 2007, the Government of Indonesia issued Law No. 17/2007 on the

2005-2025 National Long-Term Development Plan (RPJPN). The sixth mission mentioned in this document is to make Indonesia wonderful and preserved by keeping the balance between utilization, sustainability, existence and usefulness of natural resources and the environment, by protecting the function, capacity and the comfort of living in the present and the future

• through balanced land use for settlement

• social economic activities and conservation

• augmenting the economic utilization of natural resources and environment sustainably

• improving the management of natural resources and the environment to support the quality of life

• providing the wonder and comfort of life

• and enhancing the preservation and utilization of biodiversity as basic capital of development

To achieve vision of sustainable development, the Government of Indonesia conclude that long-term sustainability of development will face the challenges of climate change and global warming which affect to activities and livelihood.

The document became the RAN-GRK's vision statement, which is to "Realize Harmonious and Sustainable Indonesia”. The mission places special emphasis on initiatives to enhance development implementation management that can balance the use of natural resources with protecting functions as well as environmental supporting capacity through spatial planning in harmony with settlement, socio- economic and conservation efforts; to enhance the sustainable economic use of natural resources and environment; to enhance natural resource and environmental management to support quality of life; to provide life beauty and comfort; as well as to improve maintenance and use of biodiversity as basic developmental assets. The National Action Plan on Climate Change (RAN-PI), which the Indonesian government released in November 2007, consists of the basic guidelines for a multi- sectoral coordination effort designed to jointly address the challenges of mitigation and adaptation to climate change.

The National Development Planning /Bappenas Ministry released the report National Development Planning: Indonesian Response to Climate Change in December 2007. The National Medium-Term Development Plan (RPJMN) 2004-2009 is strengthened and reinforced by this document, which also serves as a reference on how to include climate change into the development of the RPJMN 2010-2014. At the Copenhagen climate summit in 2009, Indonesia made its first commitment to reduce GHG emissions. By 2020, it promised to reduce emissions by 26% from a baseline of business as usual (BAU) and up to 41% if there was international support. In order to provide specific policy advice and integrate the climate change issue into national development planning, the Ministry of National Development Planning / Bappenas also published the Indonesia Climate Change Sectoral Roadmap (ICCSR) in 2010.

After one and half year since the statement of commitment to reduce emission was made, Indonesian pledge was translated into domestic policy with the National Action Plan on Greenhouse Gas Emission Reduction (RAN‐GRK) in 2011 and initiated in the Presidential Regulation Number 61-year 2011. The RAN-GRK was formulated through the involvement of expert, central and regional government, as well as national Civil Society Organizations (CSOs) and the private sectors.

On January 12, 2012, in accordance with the mandate of the Presidential Regulation Number 61-year 2011, within 3 (three months) after issuing, the Guideline on Regional Action Plan (RAD-GRK) Formulation was launched. Socialization was conducted at the provincial level to achieve national target of reducing emission and to establish various measures in order to encourage the creation of new economic activities and promote behavioural changes in the community thus creating benefits as well as helping the people to adapt to climate change.

In 2015, the Government of Indonesia submitted Intended Nationally Determined Contributions (INDC) with pledged to reduce emissions from 2020 to 2030 by 29% (unconditional) up to 41% (conditional), against the 2030 business as usual scenario, an increase unconditional commitment compared to 2010 pledge of 26%. Indonesia ratified the Paris Agreement in 2016 with Law Number 16-year 2016 and submitted 1st Nationally Determined Contributions (NDC) to United Nation Framework Convention on Climate Change (UNFCCC), reiterated the 29% target and assigned the Minister of Energy and Minerals Resources responsibility to achieve 11 percentage points of the target emissions reduction from the energy sector. The Ministry of Environment and Forestry was assigned responsibility to achieve 17 percentage points of the target emissions reduction from the agriculture, forestry and other land use (AFOLU) sector, underscoring its predominant role in Indonesia’s total GHG emissions.

Next, several targets and documents have been proclaimed as a form of Indonesia's commitment to reducing carbon emissions. Low Carbon Development Indonesia (LCDI) was launched in October 2017 by Ministry National Development Planning/ Bappenas. This initiative aims to explicitly incorporate GHG emission reduction targets into policy planning, along with various interventions to conserve and restore natural resources.

Furthermore, in 2020 the Ministry of Environment and Forestry has also prepared a document Long-term Strategy on Low Carbon and Climate Resilience 2050 (LTS-LCCR 2050) which is a long-term direction and will become a guideline in the implementation of climate change mitigation and adaptation as well as lessons on the vulnerability of global conditions to the face of the Covid pandemic -19. The Ministry of Energy and Mineral Resources has also committed to reducing greenhouse gases emissions by 314-398 million tons of CO2 in 2030. This commitment is achieved through developing renewable energy, implementing energy efficiency and energy conservation and implementing clean energy technology. The document clearly states that Indonesia has aimed for low-carbon development with the net zero emission as ultimate goal.

In July 2021, Indonesia amended their NDC and submitted it to the UN Framework Convention on Climate Change (UNFCCC).. It reiterated the unconditional target to reduce CO2 emissions by 29% in 2030 relative to a business‐as‐usual baseline and also included a reduction target of up to 41% in 2030, conditional on the provision of international assistance. The updated NDC sets targets for the shares of fuels in the energy mix: 77% share of fossil fuels in 2025, comprised of 25% oil, 30% coal and 22% gas; and by 2050 a reduction of the fossil fuel share to 69% (20% oil, 25% coal and 24% gas). The National Grand Energy Strategy is being developed by the government to incorporate the strategic planning for the energy sector with the goals outlined in the NDC.

In order to attain the Nationally Determined Contribution Target and control greenhouse gas emissions in the national development, the Indonesian government has issued Presidential Regulation Number 98-year 2021. The rule specifies carbon pricing, including procedures for carbon trading, carbon taxes and result-based payments and acts as a legal foundation for implementing the NDC toward low carbon and climate resilience.

Responding mandate by Decision 1/CMA3, revisit and strengthen NDC – 2030 target, to align with Paris Agreement temperature goal by the end of 2020, Indonesia submits Enhance Nationally Determined Contributions (Enhance NDC) to the United Nation Framework Convention on Climate Change (UNFCCC) Secretariat by September 23, 2022, with increased emission reduction target from 29% in the first NDC to 31.89% unconditionally and from 41% to 43.20% for conditionally. The Enhance NDC is the nations of Indonesia's transition to its second NDC, which is aligned with the LTS-LCCR's goal of achieving net zero emissions by 2060 or earlier.

In order to achieve the 2030 NDC, Indonesia has developed strategy consist of nine programs.

• Fostering a sense of shared commitment between the public and the government.

• Building capacity to improve institution and human resource capabilities at all levels.

• Creating enabling environment to engage wider stakeholder.

• Creating a network and structure for collaboration to increase stakeholder synergy.

• A single Globally Harmonized System (GHS) data policy to help the framework for implementing transparency be implemented.

• Creating plans, strategies and intervention programs for implementing the NDC.

• Creating implementation guidelines for the NDC to support ministries and other government levels implement Program No. 6.

• Implementing the NDC means putting policies, the planning and intervention program (program No. 6) and the advice created under program no. 7 into practice.

• Monitoring and reviewing the NDC to keep tracks on the implementation's progress, reviewing the NDC and amending the NDC as needed. An inter- ministerial panel has been formed to track the implementation of the NDC's progress and results.

Enhanced NDC 2022, Indonesian net zero emission targeted five sectors, which are energy, waste, IPPU, agriculture and forestry and other land uses (FOLU). In the table below, are the emission targets to be achieved by the Indonesia government by 2030 for each sector. The energy sector is one of the main targets for reducing emissions.

Indonesian Emission Trend

Energy demand will be in line with economic growth, especially in developing countries. Indonesia, as one of the developing countries, the demand for energy continues to increase. From the available data, from 2000 to 2021, there has been an increase in GDP of almost two and a half times and total energy supply has also increased by almost one and a half times. With an increase in energy supply, it will also result in more emissions being produced.

Period 2000-2021, CO2 emissions from the energy sector will almost double. Coal is the largest contributor of nearly three-quarters of emissions, followed by oil and gas. Sectoral, electricity is a contributor of nearly half of emissions, followed by the industrial sector with approximately one-fifth.

Emissions from the energy sector in Indonesia in 2021 are almost 600 Mt CO2. In 2020, there was a decrease of 6% due to decreased activity due to the Covid 19 lockdown. However, it will rise again in 2021 as activity increases and the figures are almost the same as in 2019. Coal contributes almost half of the total emissions produced, one third of oil and around 15% of gas. the power sector is the largest contributor of around 40% of the total CO2 emissions produced in 2021, followed by transport and industry each contributing a quarter of the total emissions.

Industry Profile

Since the first oil was discovered in North Sumatra in 1885, Indonesia has had a significant presence in the oil and gas industry for more than 130 years. Indonesia joined OPEC in 1961, stopped membership in 2009 due to declining production, re-joined in January 2016 and then suspended membership again in November of that same year.

Indonesia oil and gas industry divided in two sectors, upstream and downstream sector. Exploration, development and production are all included in the upstream sector. While the downstream sector comprises of trade, storage, transportation and refinery.

Oil production has been on the decline for the past ten years, falling from 351 million barrels in 2012 to 240 million barrels in 2021, much like the proven oil reserves. Since the majority of oil-producing wells are mature and the number of new producing wells is very small, production is declining.

Indonesia imports oil, particularly from the Middle East, as a result of declining domestic oil production and rising global demand for oil refinery inputs. From 96 million barrels in 2012 to 104 million barrels in 2021, the import is expected to rise. Indonesia's gas reserves have decreased year after year, much like its oil reserves. The total proved gas reserves in Indonesia decreased from 103 TSCF in 2012 to 42 TSCF in 2021, according to statistics from HEESI 2022.

Indonesia gas production declining from 8,698 MMSCFD in 2012 into 6,668 MMSCFD in 2021. Export also declining from 3,673 MMSCFD in 2012 into 2,390 MMSCFD. Gas production, which began in 2021, is primarily utilized to provide domestic demand in the industrial sector, whether as energy or feedstock (fertilizer industry), power plants and city gas (household and commercial), as well as gas for transportation.

Public Policy Framework Analysis

Data interviews that have been conducted with various stakeholders are then summarized according to the predetermined stages. In the table above, a summary is made which is the focus of each stage. Furthermore, the detailed explanation is as follows:

Stage 1: Objective of policy

In 2016, Indonesia ratified the Paris Agreement. Then in the same year Indonesia submitted its first National Determined Contribution, with a target of reducing emissions by 29% in 2020-2030 (unconditional condition) up to 41% (conditional condition). In September 2022, the Indonesian government again renewed the NDC or referred to as Enhanced Nationally Determined Contributions (Enhances NDC) by changing the emission reduction target of 31.89% (unconditional) and 43.20% (conditional) and achieved net zero emission in 2060 or sooner. The Paris Agreement aims to maintain global average temperatures below 1.5 degrees Celsius (2.7 degrees Fahrenheit) and to limit them to 2 degrees Celsius (3.6 degrees Fahrenheit) over preindustrial levels.

The Indonesian government issued Law number 16-year 2016 as a form of support for the Paris Agreement. With the enthusiasm to achieve net zero emission as an umbrella as stated in the Enhanced NDC, the government issued several laws, presidential regulations, government regulations and ministerial regulations for related sectors, such as the Ministry of Environment and Forestry, Ministry of Energy and Natural Resources. Mineral Power and others.

Every policy issued by the Indonesian government must always be aligned with development goals and support economic growth and, of course, national energy security. In the early 2000s, Indonesia was once an oil exporter, but in the mid-2000s, it became an oil importer. Of course, this situation is more or less a consideration for the Indonesian government.

Stage 2: Related stakeholder involved

The Indonesian government as a policy maker, through several ministries and special task force bodies formulates policies related to net zero emissions in Indonesia. The government also involves several other related parties such as government-owned strategic industries, business players, associations of business players, academics, non-governmental organizations and others.

From the stakeholders above, we can categorize them into two groups. The first group is the policy maker and the second group is the policy executor. The policy maker group are the Indonesian government itself, consisting of the executive, the president and related ministries and the legislative. Meanwhile, the executor group consists of a special task force body, industry, in this case the oil and gas industry and all other related associations.

Stage 3: Indonesian Policy Formulation Process

According to Law Number 12 of 2011, Article 7, the types and hierarchy of laws and regulations from the highest to the lowest in Indonesia are as follows:

• The 1945 Constitution of the Republic of Indonesia

• Decree of the People's Consultative Assembly

• Laws/Government Regulations in lieu of laws

• Government Regulations

• Presidential Regulation

• Provincial Regulations

• Regency/City Regional Regulations

Stage 4: Awareness and readiness of Indonesian oil and gas industry

From the interviews conducted, all oil and gas industry players in Indonesia are aware of the importance of reducing emissions in the process of exploration, exploitation and production, or from upstream to downstream. International oil and gas companies with experience operating globally have more experience reducing carbon emissions. In general, these companies have implemented their own standards, be they regulations that apply in a country or internationally or the company's own internal policies. Meanwhile, the national oil and gas company, with the help of academics, consultants and collaborates with international oil and gas companies to find the best way to reduce emissions. Awareness, which then develops into an initiative, is of course very dependent on support from the government. With production continuing to decline in line with declining reserves from oil and gas wells and fluctuations in demand and oil commodity prices. These initiatives must be supported by the government with incentives, because they require additional capital expenditure to realize them. On the following paragraphs are the initiative of Indonesia oil and gas industry initiatives on reducing carbon emission.

As state owned company, based on the 2010 emission baseline, or the "business as usual" scenario, Pertamina has set a target to cut its cumulative emissions by 26.5% in 2021, or 6.58 million tons of CO2eq. Pertamina initiated a number of new initiatives in 2021 to reduce greenhouse gas emissions from Pertamina's activities, resulting in a cumulative total reduction of 641,939 tons of CO2eq. By the end of 2021, Pertamina will have cumulatively reduced emissions by 7.4 million tons of CO2eq, or around 29.07%, compared to the baseline emission levels from 2010. (Pertamina Sustainability Report, 2021).

The government of Indonesia's goal to reach 12 BSCFD (billion standard cubic feet per day) of gas production by 2030 has the support of bp and the Tangguh LNG joint venture partners as Indonesia's top domestic gas producers. The Tangguh Project, which includes the Tangguh LNG EGR/CCUS, closely reflects the goals of the sustainable energy transition that the Indonesian government has outlined. Furthermore, it supports the combined goals of bp and Tangguh LNG to decarbonize gas operations.

Including Tangguh LNG EGR/CCUS, Project UCC represents a $3 billion investment in offshore and onshore infrastructure. The project is anticipated to begin front-end engineering design (FEED) in 2022, final investment decision (FID) in 2023 and project start-up in 2026 or 2027. 

Three injection wells, one offshore injection platform, one offshore CO2 pipeline and onshore facilities for CO2 removal, processing and compression will all be present at Tangguh LNG EGR/CCUS Project. MedcoEnergi, as one of Indonesian oil and gas company, actively initiate emission reduction with focus area on technologies and best practice with key initiative reduce flaring, venting and fugitive emission, reduce energy use and intensity, adopt renewable energy sources and collaborating along Supply and Value Chains to improve efficiency and emissions closure. MedcoEnergi also looking for carbon removal and offset such as explore CCUS and CCS opportunities (MedcoEnergi, Climate Change Strategy).

Table1: Government of Indonesia Policies. 

Source: by Author research

In overall, Indonesian oil and gas industry awareness in emission reduction consider high. In line with awareness, readiness is also quite high. Support from the government through incentives is key, especially with the application of emission reduction technology, which requires a lot of capital. Currently, oil and gas players are still in the optimization stage at the exploitation stage by reducing flaring, venting and fugitive emissions. To go to the next stage, we are still waiting for support from the government.

Stage 5: Roadmap implementation of policy and challenges

The National Energy Council and the Ministry of Energy and Mineral Resources are in line with the energy transition roadmap, with several actions to reduce emission levels from year to year to achieve the net zero emission target in 2060 or sooner. Specifically for the energy sector, especially oil and gas, industry players are expected to participate in the energy transition to renewable energy.

From the interviews conducted, it can be seen how the government encourages oil and gas industry players to make the transition from fossil energy to renewable energy. On the other hand, industry players still see a gap between the targets presented and the support or incentives from the government. Oil and gas industry players also expect harmony between the regulations issued by the ministries. Related to the energy transition, some oil and gas industry players have actually started to look at new renewable energy. Pertamina, as a state-owned company, plays an important role in leading Indonesia's energy transition toward energy mix targets and reducing emissions to ensure sustainability. The aspirations of implementing green and sustainable energy are translated into the eight pillars of the energy transition. Increasing refineries to produce environmentally friendly fuels, further developing bioenergy in the form of biomass and bioethanol, optimizing potential and increasing installed geothermal capacity and hydrogen commercialization. Strategy in an integrated battery ecosystem and energy storage in Indonesia. Pertamina also strengthens integrated gasification, helping customers in the transportation, household and industrial sectors to reduce emissions. In the field of power generation, Pertamina continues to increase the use of New and Renewable Energy Projects and Low Carbon which reduce carbon footprints. Continue to strive to implement Carbon Capture, Utilization and Storage (CCUS) in increasing the production of several oil and gas fields.

Particularly for the oil and gas sector, the challenges in implementing the net zero emission policy to date include the absence of a measurable system issued by the government. The current policy is still engagement in nature, so there are no strict sanctions if it does not comply with government policies, this can be an obstacle in achieving the target of net zero emissions in 2060 or sooner. On the other hand, as discussed earlier, the high awareness of oil and gas industry players should be a driving force for the government to provide support, one of which is incentives. Oil and gas companies with high awareness and incentives for reducing emissions should be able to get incentives or access to funding so that they can become a trigger for other industry players. Thus, the government can increase the engagement stage to a more stringent and binding stage.

Stage 6: Government Evaluation

One form of measuring the reduction of greenhouse gas emissions in Indonesia is the establishment of monitoring, reporting and verification (MRV). This MRV functions as a clearing house that collects data and information on greenhouse gas emissions, categorizes them and distributes them to related parties. The recording system must be transparent and accessible to the public. Specifically for the oil sector and itself, until now the government, through the inter-ministerial Ministry of Environment and Forestry, Ministry of Energy and Mineral Resources and SKK Migas, has continued to coordinate to carry out monitoring and evaluation related to reducing carbon emissions. One of the instruments currently used by the oil and gas industry in Indonesia is PROPER. PROPER is a Public Disclosure Program for Environmental Compliance (Company Performance Evaluation Program in Environmental Management) developed by the Ministry of Environment and Forestry. In the PROPER assessment, the company will get a reputation/image in accordance with the environmental management that has been carried out by the company. The image is assessed with 5 colors, namely gold, green, blue, red and black. The best PROPER is marked in gold, which means the company has implemented environmental management in a comprehensive and continuous manner. Conversely, if a company manages to get black twice in a row, then the company can be sued and its business will be terminated.

Stage 7: Communication between Indonesian government and industry

The government, through related ministries and agencies, is actively continuing to establish communication with oil and gas industry players in Indonesia to achieve the Nez Zero Emission target in 2060 or as soon as possible. The Ministry of Energy and Mineral Resources continues to actively cooperate with the Ministry of Environment and Forestry and other institutions in meeting emission reduction targets.

Specifically for the oil and gas sector, government representation through SKK Migas is very important, one of them is Low Carbon Initiative program. Of course, incentive support from the government is also very important, considering the implementation of low carbon technology requires a very large investment.

PESTEL Analysis

PESTEL analysis is a methodology for analysing and assessing the external variables that might have an impact on a company's performance. Political, economic, sociocultural, technological, environmental and legal aspects are included as external elements in the research. For the oil and gas business, these elements may both present possibilities and challenges. The following are the summarize PESTEL analysis for Net Zero Emission for Indonesia Oil and Gas Industry.

Political Factors

As we know, Indonesia as a democratic country conducts a democratic party through general, legislative and executive elections every 5 years. The continuity of the policies of the elected government with the previous government is of course a must. Big changes will certainly affect the investment climate, especially in the oil and gas sector, which requires very large investments over a long period of time. Of course, stable and sustainable political and security conditions are a must. Referring to Law no. 25 of 2004, there are several scopes of planning in Indonesia as follows:

• National Long Term Development Plan (RPJP-National). Planning for a 20 years period.

• National Medium Term Development Plan (RPJM-National). Planning for a 5-year period.

• Ministry/Agency Medium Term Development Plan, hereinafter referred to as the Ministry/Agency Strategic Plan (Renstra-KL). Planning for a 5 years period.

• Medium Term Development Plan for Regional Working Units, hereinafter referred to as Renstra-SKPD. Regional Work Unit Planning for a period of 5 (five) years

• Annual National Development Plan, hereinafter referred to as the Government Work Plan (RKP). National Planning for a period of 1 (one) year.

• Regional Annual Development Plan, hereinafter referred to as the Regional Government Work Plan (RKPD). Regional Planning for a period of 1 (one) year.

• Ministries/Agencies Annual Development Plans, hereinafter referred to as Ministries/Agencies Work Plans (Renja-KL). Ministries/Agencies planning for a period of 1 (one) year.

• Annual Development Plan for Regional Work Units, hereinafter referred to as Regional Work Unit Work Plans (Renja-SKPD). Regional Work Unit Planning for a period of 1 (one) year.

All of the above planning products are expected to synergize with each other so that development activities run effectively and efficiently and are right on target for the welfare of Indonesia.

At the global level, the government of Indonesia is also committed to and participating in the Paris Agreement on reducing greenhouse emissions in anticipation of global climate change. The government has ratified the Paris Agreement in Law No. 16 of 2016. Indonesia has also made an emission reduction plan. This plan is contained in the Nationally Determined Contribution (NDC), where the latest is the Enhanced NDC, which was submitted in September 2022 with increased emission reduction targets from 29% in the first NDC to 31.89% unconditionally and from 41% to 43.20% conditionally. Enhance NDC is also aligned with the Long-Term Strategy for Low Carbon and Climate Resilience Strategy (LTS-LCCR), with a vision to achieve net zero emissions by 2060 or sooner.

The government inhibits the use of fossil fuels and promotes the use of new, renewable energy (EBT) through Government Regulation Number 79-year 2014, which relates to the National Energy Policy. The EBT mix objective under this strategy is set for the years 2020 to 2050. In order to increase energy security, a national energy reserve made up of operational reserves, energy buffer reserves (CPE) and strategic reserves was established by Government Regulation Number 79-year 2014, which is a derivative of Law Number 30-year 2007.

Economic Factors

Crude oil or petroleum - a fossil fuel that is the raw material for fuel oil, gasoline and many chemical products - is an important source of energy because oil contributes a significant percentage of world energy consumption. While natural gas has a fairly important role in the midst of the energy transition trend. Remember, gas is cleaner than other fossil fuels.

Even if the share declines, it is expected that the worldwide supply and demand for fossil fuels will rise in volume. The cost of fossil fuels will depend on the availability of substitutes and the state of the world economy. Commodity price volatility and limited financial funding options pose potential threats to the expansion of the company.

Investment in the research and development of new technologies is necessary for business strategies in emission reduction mitigation. The investment will be made from the company's capital and earnings in the current situation, when there is no income stream from the emission reduction initiative. The whole company's organization must recognize and support the investment choice.

Social Factors

Population growth will certainly be in line with energy needs. Indonesia is an archipelagic country, which is also a challenge in itself to distribute energy throughout the region to meet this energy demand. For areas that are quite far from energy sources, it is necessary to develop infrastructure to distribute it.

Society concern for the importance of maintaining environmental sustainability, one of which is by reducing carbon emissions, on the one hand can be a driving force for oil and gas players in Indonesia to carry out greener operations. The demand to reduce emissions in the process of exploring, exploiting and transporting energy to the community is certainly a challenge for oil and gas players.

Oil and gas players must demonstrate their commitment to the endeavour of reducing emissions and follow the recently developed emission reduction strategy in order to keep the trust of all groups of stakeholders. Gaining the trust of stakeholders by maintaining open lines of communication and outlining the emission reduction strategy will assist in achieving successful company operations.

Technology Factors

There are four aspects related to oil and gas production technology, namely gas recovery methods, nonthermal and thermal oil recovery methods and some new recovery methods.

Gas reservoir fracturing, drainage gas recovery and dry gas injection are all types of gas recovery methods. These methods were utilized to recover the reservoir and maintain production.

The three categories of nonthermal oil recovery methods are nonthermal tertiary oil recovery, nonthermal secondary oil recovery and nonthermal primary oil recovery. The main non-thermal primary oil recovery method includes gas cap drives, solution gas drives and water drives. The use of cold production and water flooding as secondary recovery methods is non-thermal. Chemical flooding and gas injection production technologies are examples of nonthermal tertiary oil recovery method. These methods in general using non thermal resources to maintain the oil production.

The hot fluid injection method and ISC are the two primary categories of the thermal recovery method. Steam flooding, CSS, hot water flooding and SAGD are a few methods for injecting hot fluid. These methods often involve injecting heat resources into the reservoir in order to recover the contents.

Nanoparticle-enhanced oil recovery, novel recovery technology for NGH and in situ oil shale conversion processing are examples of innovative recovery methods. These methods are utilized for enhanced oil recovery (EOR) and oil shale. Specifically for the oil and gas industry in Indonesia, the government through SKK Migas sees CCUS as a technology that has the potential to be implemented and as one of the low-carbon initiatives. Because this technology has not been proven and tested in Indonesia, the government must provide support, one of which is by sharing knowledge to all players in the oil and gas industry and inviting academics to assist in conducting research.

Environmental Factors

In the oil and gas industry, both upstream and downstream, there are several forms of pollution. The first example is air pollution. Gaseous hydrocarbons appear in the exploitation process. Hydrocarbon gas consists of methane, ethane, propane, isobutane, butane and pentane. This gas comes from oil and gas wells and is then called natural gas. These gases are carcinogenic, which is one of the causes of cancer. Another gas is hydrogen sulphide (H2S), which is corrosive and very deadly. Next is carbon dioxide gas (CO2), which is an inert gas and a pollutant in the atmosphere.

Next is water pollution, which can happen due to drilling waste, such as mud by products from drilling for oil and gas. Surface water quality close to exploration zones may also be impacted by drilling waste. Formation water, injected water and chemicals added for drilling or for the separation of oil and water are all present in the water that is still mixed with crude oil and gas that comes to the surface from strata that contain hydrocarbons during the extraction of oil and gas.

Legal Factors

Currently there are 2 oil and gas production sharing contract (PSC) schemes in Indonesia, namely cost recovery and gross split. Regarding the implementation of net zero emissions, at present there are no clear regulations regarding the implementation of technologies to reduce emissions. So many oil and gas players in Indonesia are waiting for instructions from the government.

Porter’s 5 Forces Analysis

The character and strength of the competitive forces operating in an industry are never the same from one industry to another. Michael Porter develop five forces model to find out the position of institution in industry to obtain a sustainable competitive advantage. Oil and gas player shall examine the basic competitive. These include

• Competition from rival seller

• Competition from potential new entrants to the industry

• Competition from producers of substitute products

• Supplier bargaining power

• Customer bargaining power

Competition From Rival Seller

Oil and gas industry in Indonesia is having few major companies as internationally operation with strong player and several players with less power. Big company consist of multinational company such as BP, Exxon, state owned company Pertamina and Indonesia company, MedcoEnergi, that have big share in Industry. Oil and gas company is slow industry growth. As we know, there is no big reserve discovery in Indonesia. Declining production happens almost in all oil and gas field while demand consider to be increasing.

The high exit barriers in the oil and gas sector force businesses to compete at below- average or even loss-making rates of return. As seen by the low price of oil, businesses maintain low corporate income while competing with one another to increase profits through cost optimization and efficiency measures.

Pertamina, as a state-owned company, has a big role in the oil and gas industry in Indonesia. For instance, the government, through SKK Migas influences the contractor to increase national interest.

The industry's competitiveness is intense since most of the businesses are competing to replace their declining oil supplies, which puts them in direct competition. This is problematic because new oil resources are becoming more difficult to discover and require more expensive and sophisticated technologies.

Competition from potential new entrants to the industry

Despite the oil and gas industry's continued attractiveness, there is no threat of new entrants. Oil and gas are requiring high capital investment for development, exploration and exploitation. Oil and gas industry also high in risk. Players often found dry hole reserve during exploration.

Oil and gas industry also need long time for return of investment. this causes the duration of a production contract in the long term, between 20 - 30 years. There are also challenge difficulties in land acquisition for exploration and exploitation. Oil and gas also required high technology, usually mature players already have higher capabilities and mastery of newer technologies.

Competition from producers of substitute products

Oil is a dominant energy source in Indonesia, still irreplaceable in many sectors especially in industry and transportation. New and renewable energy become serious threat along with the government promote to use clean and green energy to reduce greenhouse gases. Based on above explanation, substitutes for fossil energy is high, in line with technological developments and innovation of new and renewable energy.

Supplier bargaining power

Supplier bargaining in oil and gas industry is low. The oil and gas companies are in the position to choose suppliers to providing high quality materials and services to support their business, there will be many factors that influence the selection of suppliers.

Another illustration is when the price of oil changes. As evidenced by the fact that many projects were delayed during the crisis and the sharp decline in the price of oil, suppliers were forced to lower their prices in order to continue operating in the challenging circumstances.

Customer bargaining power

The bargaining power of customer is low. The supply and demand of oil, as well as geopolitics, impact the price of oil on a worldwide scale. In the same situation, there is just one huge customer who occasionally has market negotiating strength due to the quantity of oil requested, but they often have a weak negotiating position.

For gas, bargaining power of customer become high if there is no buyer, the gas field cannot develop, however this case is very rare.

VRIO Framework Analysis

VRIO framework analysis is used to explore Indonesia oil and gas industry resources capability and evaluate it against value (V), rarity (R), imitability (I) and organization (O).

Indicator used in the VRIO framework analysis are divided into tangible and intangible resources as mention in the Table 2.

From tangible and intangible resources, researcher listed capabilities of Indonesia oil and gas industry and analyse those capability against the VRIO framework.

From the assessment above, it can be conclude that Indonesia oil and gas industry internal condition classified as sustainable competitive advantage, with lies in their people knowledge capability, technology and development and maturity of production process.

Business Solution

By questioning presumptions, enlarging views and integrating knowledge from several disciplines, scenarios address blind spots and give an opportunity for admitting and working with what we don't know (and what we don't know we don't know). [1]. A method called scenario planning encourages innovative, creative thinking to better position a company for the future [2].

In addition to drafting scenarios, scenario planning involves something else that is more directly tied to strategic planning. Forecasts, prognoses and visions are not the same as scenarios [3]. Scenario planning doesn’t attempt to map the entire contextual in on go. Instead, it examines a small number (typically three or four) cuts through the future system that concentrate on a small number of key strategic planning concerns. The intuitions of the concerned stakeholders are used to determine what qualifies as a critical problem at the time of analysis [4].

Scenario planning in this research is conducted to assess possible and potential scenario for Indonesia oil and gas industry to face the net zero emission policies implementation.

The net zero emission policy itself is a must because Indonesia has ratified the Paris Agreement and has set a net zero emission target in 2060 or sooner. In order to develop scenario planning, there are several stages carried out as discussed earlier in Chapter II Literature Review.

Stage 1: Orientation Focal Issues

Scenario planning is initially with the identifying of key focal issues. Usually, the issue is a significant, upcoming decision or a strategic uncertainty that has important, long-range consequences for the fortune of the organization. The process started with defined question to answered or problem to solved with the set of boundaries of the planning process. The key focal issues in this research is developed based on the research question and research focus on Indonesian oil and gas company readiness and strategy to anticipate implementation of net zero emission policy that impact to the company business. By answering the key focal issues, expected it can provide reference for oil and gas players in Indonesia.

Table2: Tangible and Intangible Resources

(Source: by Author)

Table 3: VRIO Analysis

(Source: by Author)

Stage 2: Exploring Driving Forces

There are two large categories of driving forces, external and internal factors. External factors are divided into political, economic, social, technology, environment and legal. The other, internal factors, is organization forces as the specific action and general positions taken by organization or company. Further, driving forces divided into two categories: predetermined and uncertainties forces. Predetermined forces are virtually inevitable; they are unlikely to change radically over the defined timeframe. The other factor beside predetermined factor classified as uncertain factor. In this research, driving forces are develop based on primary data collection on stakeholder interview and secondary data collection from literature and related documents. Following are the identifying driving forces.

Indonesia economic condition

The increase in economic activity will be correlated with an increase in energy consumption across a number of industries, including transportation, industry, power and other sectors. And among all of these sectors, fossil fuels continue to be the dominant source. The carbon emissions created by using this energy are certain to remain the same; the more energy utilized, the larger the emissions produced.

Energy demand and consumption

Along with economic development, the demand for energy will also be in line. Currently, several sectors, such as electricity, transportation and others still use fossil energy. Of course, the demand for and consumption of fossil energy will continue to increase until there is new and renewable energy that can replace it.

Volatility of oil price

World oil prices are very volatile, influenced by many factors. This is something that cannot be controlled by the company and will affect the economic calculation of the business in the future. This may be an important related factor in the profitability of oil and gas companies. The company's income will rise with an increase in oil prices and this will allow for additional finances to support the creation of innovative technologies for renewable energy and emission reduction. If the price drops, on the other hand, the corporation will put more of its focus on maintaining production.

Technology and innovation

Technology and innovation play a significant role in the success of programs focused on reducing emissions as well as the transition to renewable energy sources. The newly established technology is still quite costly and not completely successful. Financing for technology development is needed, including funding from various sources, including government funding.

Companies take into account the financial gains of implementing new renewable energy projects or pollution reduction measures. Because business participants' circumstances vary, different factors are taken into account while designing new technologies. Businesses with large production and long production periods could nevertheless consider creating pollution reduction initiatives. With business players who have limited productivity and short production periods, it may not be a top focus. Government assistance is therefore required for technological development, both in terms of regulation and funding.

Government support

Support from the government greatly determines the investment climate and is closely related to the continuity of the oil and gas business in Indonesia. Regarding net zero emission, one example is the application of CCS/CCUS which is still at the pilot project stage.

In order for the government's target to reduce carbon emissions to be achieved according to the target, the government should provide support to relevant stakeholders. Researchers must be supported by providing research incentives to conduct research related to reducing carbon emissions. The oil and gas industry is given incentives to apply emission reduction technologies in the processes of exploration, exploitation and product distribution.

Energy transition and policy

The energy transition thrives if companies move quickly to implement carbon emission reductions. This will result in more rapid portfolio diversification towards renewable energy. The government itself has a strategy to accelerate the development of renewable energy in accordance with predetermined targets.

Relation between government and oil and gas industry

The effectiveness of policy execution and the sustainability of Indonesia's oil and gas industry depend on effective communication and relationships between decision-makers, upstream oil and gas special task teams and corporate stakeholders.

Operation contract

Currently there are two oil and gas operating schemes in Indonesia, namely cost recovery and gross split. Both of these schemes have their advantages and disadvantages.

Operational capability

Currently, the operational capabilities of oil and gas companies in Indonesia generally follow international standards. With a very high level of safety implementation, as well as concern for the environment, which is getting higher too. Related to net zero emissions, there are several activities that are initiative-based and have low operating costs. However, for the application of new technologies such as CCS/CCUS, oil and gas companies are still waiting for incentives from the government.

Political stability

Most of business required assurance for political stability. Oil and gas business is long term business, which requires assurance of political stability. This is related to policies issued by the government in supporting a conducive investment climate, such as legal certainties, easiness of processing business licenses, tax policies and etc.

Stage 3: Uncertainties Identification

According to their level of uncertainty and significance to the organization, these uncertain driving variables are most likely to have an impact on how the future of the important focus problem unfolds [2].

Based on primary data collection by interview and secondary data collection by supporting data research, the most frequent factors to be discussed on net zero emission policy in Indonesian oil and gas company which have highest impact and highest degree uncertainties are government support and technology innovation.

Stage 4: Scenario Creation and Narrative

Scenario Creation: From the two most critical uncertainties, then combined to create a 2x2 matrix with four different quadrants of uncertainty or future to be exploded. Based on primary data collection by interview and secondary data collection by supporting data research, the most frequent factors to be discussed on net zero emission policy in Indonesian oil and gas company which have highest impact and highest degree uncertainties are government support and technology innovation. These 2 drivers are plotted in 2 cross axes, the horizontal axis showing government support from low to high (left to right) and the vertical axis showing technology innovation from slow to fast (bottom to top). The four scenarios are created in each quadrant, which are Get Back to Nature, set alarm Bells Ringing, Get the Ball Rolling and A Hot Potato.

Narratives

The narratives cover the hypothetical events in the future which may lead to each scenario. Following scenario narratives below are developed based on author creation and imagination to describe plausible of what might happen in the future within 7 years timeframe to 2030.

Scenario 1: Get Back to Nature

Description: Get Back to Nature is meaning to return and to be one with nature. Live with nature with continuing preserve it.

Narrative

This scenario is the ideal scenario where technology and innovation related to oil and gas industry develops rapidly because of interest from related stakeholder, researcher,

academician, technology company and industry players, to implement emission reduction. As government put the emission reduction as top priority, so it allocates significant budget for research and incentive for oil and gas company to participate on climate change mitigation.

The good synergy between government as policy maker with oil and gas industry is smoothen the policy implementation process. With the dissemination of new policies, so that policy makers and industry have the same understanding. Then, there are other relevant regulations that reinforce each other, this also avoids overlapping policies. The government also provides sufficient incentives to accelerate projects aimed at reducing carbon emissions, such as implementing CCS/CCUS, electrification and etc.

Scenario 2: Narrative – Set alarm Bells Ringing

Description: Set alarm Bells Ringing is meaning     to cause concern by having a sign that something is wrong, to sound the alarm.

Table 5: Critical Uncertainties

(Source: by Author)

Figure 1: Scenario Framework

Narrative

The scenario where the technology and innovation related to reduce emission in oil and gas industry develop rapidly because interest from related stakeholder. However, there is no support from government with some reasons such demand on fossil energy is growing to support economic demand, net zero emission is not priority to achieve, no pressure from other countries.

Scenario 3: Narrative – Get the Ball Rolling

Description

Get The Ball Rolling is meaning to start doing something, especially something big. If you want to protect the environment, it’s time to get the ball rolling. If you want to save the environment, this is the right time to start.

Narrative

The case in which the government completely supports net zero emissions and makes it a high priority, especially by supporting research and offering incentives for investment. However, technology and innovation is lacking due to insufficient knowledge and research development. Unorganized research between the research institution and oil and gas industry makes the research objectives undirected and overlapping each other. This makes research budget increasing and slow in progress. On implementation stages, Lack of integration results in pilot research not being on target, many small-scale technology developments have not proven effective on a larger industrial scale, for example in equipment electrification projects and CCS/CCUS projects where CO2 reinjection pilot projects are needed to assess the success of research studies.

Scenario 4: A Hot Potato

Description

A hot potato is meaning as problem or situation that is difficult to solve and controversial.

Narrative

This is the worst scenario, where the technology and innovation develop very slow or stagnant due to no government support. It happens when no interest from related stakeholder to research on emission reduction technology with some reason such as no research budget from government, no urgency to reduce effect of greenhouse gases, etc.

Table 1: Option and Implication – Scenario 1

Source: by Author

Table 6: Option and Implication-Scenario 2

Source: by Author

Table 7: Option and Implication – Scenario 3

Source: by Author

Table 8: Option and Implication – Scenario 4

Source: by Author

Table 9: Integration

Source: by Author

Table 10: Implementation Stages

Maintaining business sustainability. • Strengtening production optimization and production cost efficiency • Implementing low cost emission reduction projects. • Comply with government regulations. • Improving internal resources for new technology and innovation.		Transformation to maintain business sustainability regarding the enviroment changing. • Possibility for new business portfolio. • Relationship with government another stackeholder.		Regularly monitoring and reviewd business strategy. • Evaluate readiness for future uncertaities and industry changes. • Relationship with government an other stackeholder.

Source: by Author

Table 11: Implementation Roadmap

Source: by Author

Due to competing objectives, the government doesn't have a sense of urgency to achieve the net zero emission goal. Since many nations, especially developing nations, still heavily rely on fossil fuels, many regard the net zero emission aim as unrealistic and too ambitious. In the other hand, new and renewable energy development are very slow and also there is no support from government.

Stage 5: Option Consideration

The research returns to the primary focal problem to examine the implications of each potential future after creating four scenarios for each company. The goal of this analysis is to identify strengths and weaknesses, alternative strategies and options to fill capability gaps, as well as the need for more study, essential action and important decisions [2].

Stage 6: Integration

Early warning signal are leading indicators that point out which future scenarios are most likely to materialize. Additionally, it can assist in making decisions about what actions to do or preparations to make for the future.

Implementation Plan and Justification

The implementation plan is built as the guideline of the firm to anticipate any scenarios happening in the future. This guideline offers advice to become preparing by reviewing internal and external resources, activities and anticipated outcomes for each of the four situations. The steps of the company's implementation strategy are shown below, which help employees comprehend how uncertainty affects every choice with a time constraint.

The following roadmap develops align with Indonesia Energy Transition Roadmap.

There are some conclusions in this research based on analysis, as follow:

From scenario planning development, there are 10 identified driving forces, as follow:

• Indonesia economic condition

• Energy demand and consumption

• Volatility of oil price

• Technology and innovation

• Government support

• Energy transition and policy

• Relation between government and oil and gas industry

• Operation contract

• Operational capability

• Political stability

The critical uncertainties for net zero emission policies for oil and gas industry are government support and technology innovation

The possible scenario that should anticipated:

• Get back to nature, both technology and innovation and government support are supportive

• Set alarm bells ringing, where the technology and innovation is advance but government support is low

• Get the balls rolling, where there is lack support from technology and innovation, while government is supportive

• A hot potato, where there is lack of support from technology and innovation and support from government.

•              The implementation plan with several stages is made in such a way that it is in line with the government's energy roadmap.

Recommendation

In every scenario that developed, the oil and gas industry participants have to perceive long-term net zero emission policies as an economic opportunity and create a suitable transition plan to deal with challenges like:

• The readiness of the oil and gas industry to face net zero emissions is a must, because this is a joint decision that applies to almost all countries in the world.

• The support from the government as a policy maker and partner of oil and gas industry, in the form of incentives for both emission reduction and research projects is very important for achieving the net zero emission target.

• Several emission reduction projects, such as CCS/CCUS are still in their early stages and even in the feasibility study stage. Knowledge sharing from this

• project is considered important as a lesson for other oil and gas players.

• Good relations and communication between the government as a policy maker and oil and gas players and other stakeholders must be harmonious to maintain the investment climate and industry sustainability.

On the future research, its recommended dive deeper into the development of new and renewable energy technology and progress of CCS/CCUS projects in Indonesia. These two aspects can be one of the keys to achieving net zero emissions in Indonesia and also become a bridge for oil and gas players in Indonesia to open up new portfolio opportumtles for companies m line with the govermnent’s roadmap to reduce dependence on fossil energy.

1. Shell International BV. (2008). Scenarios: An Explorer’s Guide. Retrieved from www.shell.com/scenarios.

2. Garvin, D. A., & Levesque, L. C. (2006, July 31). A Note on Scenario Planning. Harvard Business Review.

3. Lindgren, M., & Bandhold, H. (2009). Scenario Planning: The Link Between Future and Strategy. Palgrave MacMillan, New York.

4. Ramirez, R., & Wilkinson, A. (2016). Strategic Reframing: The Oxford Scenario Planning Approach. Oxford University Press.

5. Anderson, J. E. (2011). Public Policy Making: An Introduction (7th ed.). Cengage Learning, Boston.