Norway and Indonesia celebrates 60 years of diplomatic relations this year. Bilateral cooperation is increasing and Indonesia is attracting increased attention from various business sectors in Norway.
After more than a decade long hiatus, Indonesia is making a comeback. The 1998/99 Asian financial crisis shook the country to its core, and triggered an exodus of foreign investors and foreign capital. Slowly but surely Indonesia has worked itself back from dire straits. Today, Indonesia checks almost all the right boxes for an emerging market economy with a huge potential. A large domestic market, a growing middle-class, strong and sustained GDP growth, abundant natural resources and political stability are some of the Indonesian economy’s most attractive traits.
Foreign investors have started to take notice of the Indonesian story. In the past few years, Foreign Direct Investment (FDI) has grown to levels not seen in Indonesia since the boom years in the early 1990s. Belonging to the exclusive club of economies that have been able to buck the trend and continue strong economic growth, global recession has pushed Indonesia further into the limelight. Not surprisingly, Norwegian investors have also started to take notice. Lately, the Norwegian Embassy in Jakarta and the regional office of Innovation Norway have received an increasing number of inquiries from Norwegian companies and individuals about business opportunities in Indonesia.
These opportunities are in many sectors. However, the energy sector seems to stand out as a very interesting and promising sector in which business opportunities should be further pursued. And Norwegian companies are already there. Statoil has been present in Indonesia for many years already. The oil & gas sector is growing and new oil and gas fields are being explored and developed. Norwegian technology and expertise fit well to the needs of the Indonesian oil & gas industry.
Indonesia is blessed with a nature that provides opportunities also within hydropower. This is a field where Norway has long traditions and key competence. And Norwegian companies are now looking to Indonesia for opportunities in this sector. These days a green field mini hydropower station is being opened in Sulawesi. This is a project between Tinfos, KF Gruppen and Indonesian partners, a partnership that may lead to larger projects within hydropower in Indonesia.
LNG an important Future Energy Source
Some stranded gas fields that are too small and too remotely located to be developed the traditional way are now becoming increasingly interesting as Liquefied Natural Gas (LNG) has come up as an interesting and viable solution to this challenge.
The main sources for power generation in South East Asia are oil and coal. An increasing trend is that costly and challenging exploration and production of offshore oil cause volatile oil prices. At the same time, new natural gas resources are coming on stream globally, with particularly shale gas arriving as a game changer. This opens up for new opportunities for LNG as an interesting future energy source.
LNG is an obvious candidate to meet the growing demand for clean power generation across the region, replacing coal and oil. And new LNG production sites, storage- and bunkering terminals for LNG are planned in the region for the coming years.
As the environmental benefits of an expanded supply chain of LNG are perceived as significant, given the right political and economic framework, so may the economic benefits be with opportunity of accomplishing improved energy efficiency and energy security.
Potential for Norwegian Industry
Our aim is make use of Norwegian expertise, technology, and experience and system delivery in the Asian Market within the LNG value chain. Norwegian players have a significant experience in the LNG business, and Norway is at the forefront when it comes to use of LNG as fuel in coastal shipping. And Norwegian innovation strategy, “Maritime 21” underlines “Use and distribution of LNG” as one of the main topics for future joint industrial and governmental investments in Norway.
LNG Study
With the support of the Norwegian Ministry of Foreign Affairs, Innovation Norway initiated earlier this year a study on “Opportunities assessment of the South East Asian market for LNG shipping and distribution”. The study was carried out by DNV Clean Technology Centre in Singapore, and presented in October 2010. The study provides a background and excellent foundation for development of industrial business cases.
In conclusion the study shows following opportunities;
· As energy demand continues to grow in South East Asia, there will be a need for increased use of natural gas
· The region, as a whole, is lacking a complete regulatory framework and incentives needed to promote investments in LNG infrastructure
· Small-scale LNG distribution to end users is particularly interesting for regions where water ways play an important role. This is especially interesting for Indonesian.
· Norwegian industry has unique know-how in the use of LNG, especially when it comes to LNG as a fuel for ships
· The small-scale LNG distribution chain includes LNG carriers, import and export terminals, LNG trucks and bunkering- and storage facilities - all part of particular Norwegian LNG capabilities
· In South East Asia, the potential to use LNG as a fuel for ships may be the largest for ferries, in particular for speed-crafts operating within and around Singapore, as well as Vietnamese and Indonesian governmentally owned ferries
Conclusion
A few opportunity areas for bilateral business cooperation have been mentioned above. And there are many more. Indonesia is an interesting but also challenging market to enter into for a company new to this country. However, this is an area where the Norwegian Embassy and Innovation Norway can play an important role in opening doors and guiding company executives around in a new business environment and through that make the necessary difference for companies to succeed in this very promising market.