Evaluation of Indonesia’s Zero Routine Flaring 2030

Implementation using System Thinking Approach

Devy Deliana Putri, and Widhyawan Prawiraatmadja

School of Business and Management, Institut Teknologi Bandung

TK Low Center for Executive Education Gedung Graha Irama (Indorama), 12th Floor, Jl. H. R. Rasuna Said Kav. 1-2,

RT.6/RW.4, East Kuningan, South Jakarta City, Jakarta 12950

Keywords: Public Policy, Gas Flare, Oil and Gas, System Thinking.

Abstract: In 2017, the Government of Indonesia (GOI) became one of the countries that initiate to reduce global gas

flaring by Zero Routine Flaring 2030, which declared by Minister of Energy and Mineral Resources to World

Bank. However, the level of the implementation of Zero Routine Flaring 2030 still not met the expected by

GOI. The results of the evaluation show that there are many factors that barriers to implementation for Oil

Company are 1) nature of gas flare,2) no facility available,3) lack of commitment, 4) uneconomic project,

then, the barriers for Government barriers are 1) regulation, 2) prices discrimination, 3) long process of

bidding process, at last, the barriers for Gas Buyer barriers are 1) difficulties in getting data, 2) nature of gas

flare, 3) uneconomic project and 4) high cost of technology.Overall, this policy has a useful purpose and

should be continued. Therefore, it can be improved from the current is to support the effectiveness of the

system. Based on the analysis using the methodology of system thinking, then the government interventions

should be formulated to improve the situation are: 1) improving Company commitment, 2) improving

accurate data measurement, 3) improve the bidding process, 4) improving bidding process.

1 INTRODUCTION

1.1 Background

The Government of Indonesia has committed to

reducing Greenhouse Gas (GHG) emissions in the

National Determined Contribution (INDC)

Document presented in the UNFCCC COP-21 in

Paris reflects the strong political will of the

Government to take part in reducing global GHG

Emissions. One of the efforts carried out in reducing

emissions is gas flare reduction by limiting the gas

flared. Through Presidential Regulation Number 61

of 2011, monitoring the implementation of the policy

to reduce gas combustion emission volume is part of

the National Action Plan to reduce Green House Gas

(GHG) emission (RAN GRK). In 2017, the

Government of Indonesia became one of the countries

that initiated to reduce global gas flaring by Zero

Routine Flaring 2030, which declared by Minister of

Energy and Mineral Resources to World Bank. Then

a technical regulation instrument is needed to support

this commitment.

1.2 Problem Statement

There is some Regulation to support of Indonesia’s

Zero Routine Flaring 2030 that publishes by MEMR.

In order to control and monitor the optimization of

gas flare utility, DG Migas under MEMR has issued

MEMR Regulation No. 31 of 2012 about flare

management in oil and gas operations which

mandates that oil and gas contractor or company must

ask the government to issue permits to conduct gas

flaring beyond the limit. Also, the regulation strongly

recommends that companies/contractors measure and

report their gas flaring activities. This regulation took

effect in December 2013, one year after it was issued.

Until now, this is considered good progress in the

effort to minimize gas flaring. We can see from the

data collected by DG Migas below.

Putri, D. and Prawiraatmadja, W.

Evaluation of Indonesia’s Zero Routine Flaring 2030 Implementation using System Thinking Approach.

DOI: 10.5220/0009959500120022

In Proceedings of the International Conference of Business, Economy, Entrepreneurship and Management (ICBEEM 2019), pages 12-22

ISBN: 978-989-758-471-8

Figure 1. Flaring Data in Upstream Oil and Gas Activity

However, a command and control approach in

MEMR No.31 OF 2012 alone is not enough. It needs

to be combined with economic instruments such as tax

and excise to give incentives/disincentives for

contractors or companies to contribute to gas flaring

reduction and GHG emission reduction efforts as well.

So, MEMR has issued MEMR Regulation No. 32 of

2017 concerning utilization and Flare gas Pricing in

Upstream Oil and Gas Activity on May 2nd, 2017.

This regulation sets the price of gas flares lower

than the natural gas price, generally following the

impurity level so that the company that able to get the

return on investment. The gas flare price in this

regulation is set at a maximum of 3.67 USD/MMBTU,

while government agencies (BLU) can buy flare gas

at the price of 0.35 USD/MMBTU.

However, The level achievement of Indonesia's

Zero Routine Flaring 2030 still not met the expected

by GOI. The result from the data that collected, only

one gas sale agreement conducted, and still 178

MMSCFD flare gas to be burned in Indonesia. Most

of the oil companies still burned the gas flare. As a

result, the outcomes and impact of this policy are still

hard to measure; notably, there are many barriers to

effective implementation. This study would like to

evaluate the implementation objectively for

regulation, so the result of this study can be feedback

for MEMR for improving the intervention in the

future.

1.3 Research Question

From the formulation of the above problems, this

study will answer the question related to the

implementation of Indonesia’s zero routines flaring

2030 as follows.

a. How are the current implementation of

Indonesia’s Zero Routine Flaring 2030?

b. What are the barriers to the implementation of

Zero Routine Flaring 2030?

c. What government intervention should be taken to

improve the implementation of Indonesia’s Zero

Routine Flaring 2030?

d. How will be the implementation plan for the

solution?

1.4 Research Objective

The main objectives of this study are:

a. Understand the real issues causing the barriers in

the implementation of Indonesia’s Zero Routine

Flaring 2030.

b. Propose a recommendation to DG Migas in order

to solve Indonesia's Zero Routine Flaring 2030.

1.5 Research Methodology

Our methodology includes a combination of primary

and secondary research for Indonesia's Zero Routine

Flaring 2030. For secondary research need during the

study included annual company reports of gas flare,

press releases, and relevant documents. Reliable

sources such as journal, paper and law, regulation,

and government website or publication also

referenced in PESTEL and SWOT to recognize the

business issued.

Primary research was carried out to validate data

and analysis. Primary data started with the interview

and focus discussion group with some stakeholders

who involved in flare gas management in Indonesia

such as Government, Oil and Gas Company, gas

buyer, and Development Institution. Then, the data

from the interview and FGD will be variable data for

being analyzed by the system thinking approach.

Then, it will focus on some variables to improve the

system.

1.6 Research Limitation

The scope of this study was limited to perform

analysis of Indonesia’s Zero Routine Flaring 2030 for

oil companies, Government, and gas buyers in

Indonesia.

There some potential limitations of data,

including the accuracy and validity of the data in the

document reported by oil companies, because there

was no opportunity for MEMR to check data directly.

2 BUSINESS ISSUE

EXPLORATION

2.1 Conceptual Framework

To have a better understanding of the issue, the best

tools to be used are using a conceptual framework to

Evaluation of Indonesia’s Zero Routine Flaring 2030 Implementation using System Thinking Approach

analyze each of the related factors and use it as a

baseline to describe the purpose of the study. It

contains explanations of every analysis taken on how

to understand each of the activities.

Figure 2. Conceptual framework

The framework of this study (Figure 2.) resumes

limiting patterns of thought about the critical matter

or keys of business properness analysis implemented

to Zero Routine Flaring Policy, with government

regulation as the challenge.

2.2 PESTEL Framework

Political

In 2010, Government Indonesia coordinated with

BAPPENAS launched Indonesia climate change

sectoral roadmap 2010. Monitoring the

implementation of gas flaring volume reduction

policy is part of the National Action Plan on Green

House Gas (GHG) Emission Reduction (RAN-GRK),

stated through President Regulation No. 61/2011.

With strong political will, the Government of

Indonesia, play a role in reducing GHG emissions

globally at UNFCCC COP-21 in Paris, to reduce

Greenhouse Gas (GHG) emissions as stated in the

document contributing to the national emission

reduction (Intended Nationally Determined

Contribution / INDC). The submission of INDC by

Indonesia is essential so that the whole world knows

the policies that have been are being and will be

carried out by Indonesia to reduce GHG emissions.

Indonesia has committed to reducing GHG emissions

by 29 percent on its own (business as usual) and 41

percent with international assistance until 2030.

The Initiative Global Zero Routine Flaring 2030,

introduced by the World Bank, brings together

government, oil companies, and development

institutions who recognize the flaring situation

described above, agree to corporate to eliminate

routine flaring no later than 2030. This initiative has

received 77 endorsements, Indonesia is one of them

through the minister of Energy and Mineral

Resources letter in 2017, the support world bank in

reducing the global emission.

Economic

Indonesia is the country with the most abundant

energy consumption in Southeast Asia and fifth in the

Asia Pacific in primary energy consumption, placed

after China, India, Japan, and South Korea. The high

GDP growth, reaching an average of 6.04% per year

for the 2017-2050 period, is expected to increase

Indonesia's fuel demand in the future. Indonesia's fuel

demand in the future will escalate Indonesia's role

both in the world energy market and to decrease

global greenhouse emissions (Indonesia Energy

outlook 2018, BPPT).

The National Economic growth rate with an

average rate of 5.64% per year in the last five years

has encouraged an increase in domestic gas demand

both as fuel and industrial raw materials. This growth

in demand has driven up domestic gas prices and

soaring demand for infrastructure, both pipelines, and

non-pipelines.

Indonesia's gross domestic product occupies the

highest number compared to other Southeast Asian

countries. The national gross domestic product in

2010-2015 increased by 31.6% or an average of 6.3%

per year. In 2015, Java Island occupied the province

with the most significant gross domestic product with

a percentage of 58.1%, followed by Sumatra with

21.7%, Kalimantan with 8.8%, Sulawesi with 5.8%,

Bali and Central Java with 3.04%, and Maluku and

Papua by 2.5%. (Indonesian Natural Gas Balance

2016-2035, MEMR, 2018).

Based on the explanation above, the economic

growth generates the growth of energy demand; then,

the increasing energy demand has a positive impact

on oil and gas companies as a supplier of oil and gas

commodities.

Sociocultural

Indonesia has over 250 million people, and it is the

fourth most populous in the world and the world's

largest Muslim majority country, with a constitution

that embraces democracy and pluralism. Its people

come from some 300 distinct native ethnic groups

speaking over 700 languages and dialects and live on

some 6000 islands amongst an archipelago of some

17,500 islands. Indonesia has many volcanoes and is

plagued by many natural hazards, including

earthquakes, volcanic eruptions, tsunamis, floods,

and droughts. The island of Java, where 58 percent of

the population lives, is the world’s most densely

populated island. Eleven Indonesian cities have over

one million inhabitants. The largest is Jakarta, with

approximately 10 million people. Except for Medan

ICBEEM 2019 - International Conference on Business, Economy, Entrepreneurship and Management

in Sumatra, the four other cities of over 2 million

people, are all located in Java.

Table 1. Population index by Work Bank

(Source: World Bank, 2019)

Based on the table above, it can be concluded that

the abundant working potential population because

the productive young age is higher than the age of Old

and children. This demographic bonus is a

phenomenon where the population structure is very

beneficial in terms of development and new project

because the number of productive age is enormous

(68%), while the proportion of young age (0-14 years)

is 27% and the proportion of elderly (65 years and

over) is 5 %.

Social aspects in Indonesia still classics problems,

including local permits, delays in land acquisition,

and security. These are problems that must be solved.

While, the bonus of Indonesia demographics, it has a

positive outcome in human resources supply.

Technology

Technological developments allow the

commercialization of gas flaring and further reduce

emissions. Based on the GGRF report (2012), The

following four options have been identified and

considered for associated gas monetizing project or

utilization:

a. Own use as the power source in the oil field for

transmission to the existing power grid (medium-

scale)

b. The power source in the oil field for

electrification of nonelectrified rural area (small

scale)

c. Supply of piped gas to more significant

consumers, such as heat and power plants and

industries (medium-scale).

d. Liquefied petroleum gas production (LPG),

alone or in combination with other means of use

(CNG or mini GTL) (Small-scale).

Determination of the right technology selection is

undoubtedly needed, and it is also influenced by

several factors, including the volume and

composition of gas and distance between the gas

location and market (intended customer). Those two

factors, we can see the concept in Figure 3. as follow,

Figure 3. Production volume versus distance to the market

framework for gas technologies (Wood and Mokhatab,

2008)

In conclusion, the technology aspect has the

potential for wide-ranging effect on business. The

technology develops a business model, so that a

feasible project not only technically, but also

economically.

Legal

Law No. 22/2001

Oil and gas activities are controlled by Government

(generally via a PSC) as the grantor of the relevant

concession. Law No. 22 differentiates upstream

business activities (exploration and exploitation) and

downstream business activities (processing,

transport, storage, and commerce) and stipulates that

upstream activities are controlled through PSC

between the business entity and executing agency

(SKK Migas – Special Task Force Upstream Oil And

Gas Activity) (Article 6).

Government Regulation 36/2004 on Downstream

Business Activities.

Downstream business activities are carried out by

business entities holding business permits issued by

the minister, implemented through a reasonable,

healthy, and transparent business competition

mechanism. In article 12, downstream activity in oil

and gas, consist of processing business activity

includes a refinery, transportation activity either by

land, water, and air including natural gas

transportation through a pipe for commercial

purposes, storage business activities which include

receiving, collecting and storing for commercial

purpose and commercial business activity including

buying, selling, exporting, importing petroleum, gas

fuel, and other product, including natural gas pipes.

Information Populatio n Average Annual

Population

Growth

Population Age

Composition

Dependency Ratio Crude

Death

Rate

Crude

Birth

Rate

Unit Million % % % % % of

working age

ulation

% of

working age

ulation

Category 2000 2018 2000-2018 Age

0-14

Age

15-64

Age

65+

Young Old Per 1,000

Per 1,000

Indonesia 211.5 267.7 1.3 27 68 5 40 8 7 19



Evaluation of Indonesia’s Zero Routine Flaring 2030 Implementation using System Thinking Approach

Minister of Energy and Mineral Resources

Regulation (MEMR Regulation) 31/2012 on

Implementation of Gas Flaring in Oil and Gas

Business Activities

This regulation mandates companies to optimize the

flare gas utility. In article 3, the government set the

limitation of flaring gas based on activity, such as 3%

from feed gas for gas field, 5 MMSCFD for oil field

(Average in six months), 0,3% intake gas plant and

0,8% from intake oil plant. Moreover, if they are

flaring gas beyond the limit, they must request

government permits to conduct flaring.

MEMR Regulation 32/2017 on Utilization and

Selling Price of Flare Gas in Upstream Oil and Gas

Activities

Related to supporting national energy security and

reducing greenhouse gas emission and optimizing the

use of gas flare produced in the upstream oil and gas

business, the government has issued MEMR

Regulation number 32/2017 concerning utilization

and selling prices of gas flares in upstream oil and gas

business activities on May 2, 2017. The price of gas

flaring is set at the lowest price of 0.35 USD per

MMBTU, while the maximum price is set at 3.67

USD per MMBTU.

Law No.32 of 2009

The government of Indonesia has also issued

regulations regarding environmental protection,

namely Law No.32 of 2009. Article 22 contains rules

and analysis of environmental impact (AMDAL), any

business and activities that have an essential impact

on the environment must have an analysis of the

environmental impact (AMDAL) or UKL UPL and

refer to article 36, any business that has AMDAL or

UKL UPL are mandated to have an environmental

permit.

Environment Aspect

Gas flaring consists of greenhouse gas such as CO

and CH

, when released directly into the air, the traps

heat in the atmosphere. The climate impact is

undeniable, suggesting a significant contribution to

global GHG Emissions. CO

emission comes from

only the combustion of fossil fuels for about 75%.

is more harmful than CO

. It has 25 times more

significant global warming potential than CO

on a

mass basis (Johnson, M.R.; Coderre, A.R.: Canada,

International Journal of Greenhouse Gas Control.

2012, 8, 121–131.)

Figure 4. Summary of Pestle Analysis for Zero Routine

Flaring Policy

2.3 SWOT Analysis

SWOT analysis is a tool to evaluate the strengths,

weaknesses, opportunities, and treats in any business

enterprise. A SWOT analysis can help to gain insights

into the past and think of possible solutions to existing

or potential problems, either for an existing business

or for a new venture. This tool will help a company to

make an excellent strategic plan for business growth

within the industry. Figure 5. shows the SWOT

analysis on the Government side to improve the

implementation of zero routine flaring policy.

Figure 5. Summary of SWOT analysis

2.4 Stakeholder Mapping

Through regulation analysis (PESTEL), a better

understanding of the interrelationship of these

ostensibly different aspects is highlighted through

stakeholders. In this related regulation analysis,

various stakeholders who contribute to the flare gas

management have been identified and their

interconnectedness.

ICBEEM 2019 - International Conference on Business, Economy, Entrepreneurship and Management

Table 2. Primary Stakeholder

Primary

Stakeholder

Role

DG of Oil and

Gas (MEMR)

The Director-General of Oil and Gas has

the authority to issue an approval in the

case of a proposal from a KKKS or gas

processing business entity to flare gas.

Issue downstream activity business

permits, in this regard:

a. Processing Business Permit.

b. Transportation Business Permit.

c. Storage Business Permit.

d. Trading Business Permit.

Select business entities as flare gas

buyers. Including the authority to issue

assignments to state or region-owned

enterprises.

Establish the selling price of flare gas

with the recommendation of SKK

Migas

Act as a working-level unit supporting

the implementation of the minister's

roles.

KKKS /

Processing

Business Entity

(Who Produce

Flare Gas)

Conduct optimization study for the

flaring of gas with volume exceeding

limitations.

Gas flaring must obtain the approval of

the DG of Oil and Gas.

Provide data on flare gas potential for

SKK Migas.

Lemigas

Perform research and development,

technological engineering, study and

survey, and services in the oil and gas

sector.

Research performed can serve as the

basis for the Ministry of EMR in

formulating policies.

SKK Migas

perform tenders for the utilization of

flare gas, including providing data on

flare gas potential.

SKK Migas is tasked with issuing a list

of recommended flare gas prospective

buyers to the Minister of EMR.

Conduct Flare Gas Potential Offer

Team to Perform evaluation towards

(offer) documents submitted by

prospective buyers.

Pertamina, PGN

(State-Owned

Enterprises)

Implement government policies (can be

appointed by the government to

implement certain policies in the

utilization of flare gas).

Can simultaneously be producer and

buyer of flare gas

Flare Gas Buyers

Business Entity Holders of Gas Trading

and/or Processing Business Permits.

Government agencies, SOEs, regional

SOEs.

Interview Design

The interview was designed to capture more in-depth

and specific information on the issue from the

respondent. The key informants selected from the

stakeholder of gas flare. "key informants" represented

by each stakeholder, which is from Government,

Government Agency, Private Gas Buyer, and Oil

company as a gas producer.

Focus Group Discussion Design

Focus Group Discussion (FGD) seeks oil and gas

company as gas producer and government

perspective in the implementation of gas flaring

reduction, in order to understand the real issue in

implementing Zero Routine Flaring Policy, find the

root causing the barriers for oil and gas company in

implementing gas flare reduction and propose a

recommendation to solve the issue.

FGD divided into four sections, are:

a. Discussion with Big Five Flare Producer

(Onshore and offshore) and one Gas Buyer

Company that success in gas flare monetization

in Indonesia.

b. Discussion with Big Ten Flare Producers

(Onshore and offshore) Company in Indonesia.

c. Discussion with Oil Refinery Company in

Indonesia.

d. Discussion with Gas Refinery Company in

Indonesia.

The Principle of System Thinking

System thinking is a set tool, but also a framework for

looking at an issue as systemic wholes. It is language,

too, that offers a way to communicate about dynamic

complexities and interdependencies.

The principle of system thinking is:

a. Thinking of the ‘Big Picture’

b. Balancing short term and Long Term Perspective

c. Recognizing the dynamic, complex and

interdependent nature of systems

d. Taking into account both measurable and no

measurable factors

e. Remembering that we are all part of the system

in which we function and that we each influence

those systems even as we are being influenced by

them

Through this "lens," we start seeing our

circumstances in a new light, taking more

responsibility for our own role in problems, and

identifying more effective ways of addressing

recurring difficulties.

Causal Loop Diagrams

The causal loop is a useful way to represent dynamic

interrelationships. Provide a visual representation

with which to communicate that understanding and

Make explicit one's understanding of a system

structure to capture the mental model.

The component of causal loop diagrams are 1)

variables as an element in a situation which may act

Evaluation of Indonesia’s Zero Routine Flaring 2030 Implementation using System Thinking Approach

or be acted upon, 2) Links / Arrows - show the

relationship and the direction of influence between

variables, 3) B as Balancing feedback loop that seeks

equilibrium, 4) R as Reinforcing feedback loop that

amplifies change.

3 BUSINESS SOLUTION

3.1 Data Analysis

The Barrier for Oil Companies

The key informants from oil companies agreed that

oil company does not commit to executing their

policy and no program in the internal oil company to

reduce or utilize the gas flare, no facility available,

and flare gas characteristic are the barriers to the

successful implementation of zero routine flarings in

oil and gas sector.

Barrier for Government

The key informants from the government said that the

first challenge expressed is about the content of

regulation itself, including the bidding process, prices

determined and reporting for implementation in

stakeholders who want to utilize or monetize the gas

flare

The Barrier for Gas Buyer

Based on MEMR No. 32 / 2017, the Gas buyer may

come from a Private Gas Buyer and Government

agency. The key informants from the gas buyer

agreed that they have barriers to the nature of flare gas

to manage, data as a key for investment decision,

economic aspect, and technology are the barriers to

monetization of flare gas to support the

implementation of zero routine flarings in oil and gas

sector.

The comparison between the result obtained based on

interviews and FGD can be seen in table 2.

Table 3. Summary of Barriers

Interview Focus Group Discussion

Oil Company Barrier

 Nature of Gas Flare,

No facility available,

Lack of commitment

Government Barrier

 Differences in prices

and Bidding Process

Gas Buyer Barrier

 Nature of Gas Flare,

Data, Economic

Aspect and

Technology

Data Management

 Inaccurate data, Data

accounting, Reporting

Internal Factor of Company

 Lack of Understanding,

Lack of Management

support, commitment

Gas Buyer

 Difficulties in

processing/utilizing gas

flare, Technologies

limitation, Gas Supply

Continuity

Nature of Gas Flare

 Scattered source of Gas,

Flow Rate relatively

small, Low Gas Pressure,

Uncertainty of Spec and

volume of Gas, High

Impurities (CO2 and

H2S), Remote Area

Regulation

 Need regulation for

incentive or fiscal

regulation, Permit

simplicity, No pricing

regulated, No Bidding

Process

3.2 Alternative Solution

Based on the interview, the key informant gave some

suggestions to MEMR that they need to make further

policies to improve the implementation of zero

routine flarings in the oil and gas industry in

Indonesia. Summary of alternative solutions

complied with the interview and FGD methods can be

seen in Table 3.

Table 4. Summary of alternative Solution

Interview Focus Group Discussion

Simpler process

agreement

Publish accurate data

Action plan

learning from other

countries

No Pricing discrimination

Other New Regulation

Improving Flare Gas

Data Management

System

Providing Technical

Assistance for gas

producer and buyer, such

as provide technology

and business model from

development institution

Helping to design the

financing mechanism for

carbon credits to be

realized through gas

flaring reduction projects.

Regulation Support

Government strategy by

Roadmap Zero Routine

Flaring

3.3 System Thinking by Causal Loop

Diagram

The analysis of barriers to implementing the Zero

Routine Flaring Policy shows the main barriers are 1)

Oil Company Barrier, which are gas flare Condition,

No facility available, Lack of commitment,

Uneconomical Project, 2) Government Barrier, which

is Regulation, Prices Discrimination, Long Process of

ICBEEM 2019 - International Conference on Business, Economy, Entrepreneurship and Management

Bidding Process,3) Gas Buyer barriers Difficulties in

getting Data, Nature of Gas Flare, Uneconomic

project, High cost of Technology, these are translated

into variables in the system, as follows

Table 5. Variables of Clausal Loop Diagram

Barriers Related Variables

Oil Company Barrier

Nature of Gas Flare Associated Gas

Production

Oil Production

O&G Well Production

State Revenue

Zero Routine Flaring

Policy

Energy Demand

No facility available Available Facility

Lack of commitment Oil Company

Commitment

Flare Gas Utilization

Uneconomic project Alternative

Funding/Financing

Short Fall/Uneconomical

Project

Project Delay

Investment Provide

Investment Development

Government Barrier

Regulation Zero Routine Flaring

Policy

Energy Demand

Prices Discrimination Price Determine

Long Process of Bidding

Process

Bidding Process

Gas Buyer Barrier

Difficulties in getting

Data

Accurate Data

Data Reporting

Data Publishes

Nature of Gas Flare Flare Gas

GHG Emission

Uneconomic project Commercialize Flare Gas

The high cost of

Technology

Gas Buyer Investment

All of those variables are important to optimize

the implementation of the Zero Routine Flaring

Policy. Based on the FGD result that optimum

implementation of zero routine flaring policy will

result in a better commitment from the company,

accurate data measurement, Alternative

Funding/Financial, and gas buyer investment.

The causal loop diagram developed as follows.

Figure 7. implementations of the Zero Routine Flaring

Policy

From the causal loop diagram above, it is shown that

the role of alternative funding/financing and bidding

process has significant influence to determine the

behavior of the system, as it has the most reinforcing

loop, along with flare gas utilization and monetization

to support the Zero Routine Flaring Policy. The oil

company’s commitment is the initial capital to

establish gas flare utilization and reduces GHG

Emissions at the same time.

Therefore, to improve flare gas utilization, it is

necessary to optimize the investment development by

alternative funding/financing so that the

implementation of zero routines shall be achieved

while Government needs to make more

straightforward and faster proses in bidding and

pricing in order to support the gas flare monetization.

Solution

Based on the system thinking approach, this

Study suggested some solutions for improving the

implementation of zero routine flarings.

Alternative

Fundi ng/Financi ng

Zero Routine

Flaring Policy

Flare Gas

Utilization

Investment

Development

Short Fall/Unconomic

Project

Investment

Provide

State Revenue

Project Delay

+ +

Oil Company

Commitment

O&G Well

Production

Oil Production

Associated Gas

Production

Available

Facility

Flare Gas

GHG Emission

Commercialize

Flare Gas

Gas Buyer

Investment

Accurate Data

Meassurement

Data Reporting

Data Publishing

Energy Demand

Pricing

Determine

Bidding

Process

Evaluation of Indonesia’s Zero Routine Flaring 2030 Implementation using System Thinking Approach

Figure 8. The importance of improving some variable in the

system

Improving Company Commitment in the System

The activities that can be done related to this include:

a. MEMR, through DG Migas, sends a letter to the

top-level management of oil companies related to

an “action plan for supporting the Zero Routine

Flaring Policy.” This “enforcement” letter is

setting a minimum zero routine flaring

implementation level.

b. SKK Migas conducts Technical assistant to all

oil companies to a made action plan or programs

internally related to reducing gas flare.

c. Workshop for Knowledge and Experience

sharing from Oil Company who already

conducted gas flaring reduction to all oil

companies.

d. Small-Group Discussion, which can be done

periodically, to discuss Zero Routine Flaring

Policy and mutually enrich each other’s

knowledge.

e. DG Migas engages development institutions to

oil companies to improve the action plan.

f. Oil companies submit Zero Routine Flaring 2030

Action Plan to DG Migas

g. DG Migas evaluates the action plan and

categories the action plan

h. Benchmark success plan zero routine flaring

2030

i. Oil Companies execute the gas flare utilization

project

Alternative Funding/ Financing

In regulation, it requires each operator to make an

economic evaluation of all the available associated

gas utilization options and to utilize the gas whenever

gas utilization is shown to be economical. Only if all

available options can be shown to be sufficiently

uneconomic, then the gas may be flared.

Also, fiscal instruments, such as incentives and

penalties, are commonly used to improve the

attractiveness of flare gas reduction projects that are

uneconomic and otherwise are unlikely to be

implemented. Some company needs technical

assistance for it to get financing from external. There

are some example financing programs in Indonesia,

such as Natural Resources for Development Program

(NR4D) by the world bank and JCM (Joint Crediting

Mechanism) by Asian Development Bank (ADB).

Therefore, some Action plan is needed to do in

providing alternative funding or financing in the

system, as follow:

a. DG Migas collaborates with SKK Migas to

engage Development institutions such as world

bank, ADB, and other financing banks.

b. DG Migas conducts a memorandum of

understanding (MOU) with Development

institutions and oil companies regarding flare gas

utilization in Indonesia.

c. DG Migas, Development institution and oil

companies, execute the gas flare utilization

project.

Improving Accurate Data Measurement

More accurate data would provide a clearer

understanding of the extent and location of problem,

as well as a basis for targeted action designed to both

prevent the loss of potentially valuable resource and

reduce harmful emission into the atmosphere" –

(GAO-04-800 Natural Gas Flaring and Venting -

Opportunities to improve data and reduce emissions

– Page 5 – US government Accountability Office US

GAO, July 2004)

Action for data improvement can be done as follow:

a. DG Migas drafts and publishes technical

guidelines for measuring data and reporting

flaring among measurement standards conducted

by the oil and gas company

b. DG Migas revises the report format flare gas

DG Migas conducts technical assistance to

calculate measurement and reporting.

d. Oil Companies and Gas Buyers report for

monthly and annual Reports.

Alternative

Funding/F inancing

Zero Routine

Flaring Policy

Flare Gas

Utilization

Inve stment

Development

Short Fall/Unconomic

Project

Inve stme nt

Provide

State Revenue

Project Delay

+ +

Oil Company

Commitment

O&G Well

Production

Oil Production

Associated Gas

Production

Available

Facility

Flare Gas

GHG Emission

Commercialize

Flare Gas

Gas Buyer

Inve stme nt

Accurate D ata

Meassurement

Data Reporting

Data Publi shi ng

Energy Demand

Pricing

Determine

Bidding

Process

ICBEEM 2019 - International Conference on Business, Economy, Entrepreneurship and Management

e. DG Migas and SKK Migas publish gas flare data

on their official websites to attract investors for

gas monetization.

Improving the Bidding Process

As seen in the visualization of the system through the

causal loop diagram, it appears that the bidding

process will affect the improvement in commercialize

gas and in result reducing the volume gas flaring. To

accelerate the process, the bidding shall be by way of

an open and competitive bid process. Therefore,

Action to improve the bidding process will be

conducted by SKK Migas as follow:

a. SKK Migas prepares (brainstorming and

conceptualization) of the bidding process

b. SKK Migas Drafts Criteria of Faster Bidding

Process

c. SKK Migas Formulates procedure process

bidding

d. SKK Migas conducts Regulation Harmonization

4 CONCLUSIONS

In this conclusion, we provide the answers to research

questions:

a. Zero Routine Flaring Policy has been formulated

by all stakeholders in such an excellent way to

reduce gas to be burned and reduce greenhouse

gas emissions resulting from oil and gas

activities. However, the result of the policy

evaluation of implementation indicates the flare

gas still exist and relative in significant volume,

thus having difficulty in reaching the goal.

The level achievement of gas flare reduction still

not met the expected by GOI. The result from the

interview, only one gas sale agreement

conducted and still 178 MMSCFD flare gas to be

burned in Indonesia. Most of the oil companies

still burned the gas flare. As a result, the

outcomes and impact of this policy are still hard

to measure; notably, there are many barriers to

effective implementation.

Overall, this policy has a useful purpose and

should be continued. Therefore, it can be

improved from the current state is to support the

effectiveness of the system. MEMR should

modify the strategy of implementation.

b. The barriers to Zero Routine Flaring

implementation for stakeholders is as follows:

 For Oil Company Barriers are Nature of

Gas Flare, No facility available, Lack of

commitment, Uneconomic project

 For Government Barriers

are Regulation, Prices Discrimination,

Long Process of Bidding Process,

 Gas Buyer Barriers are Difficulties in

getting Data, Nature of Gas Flare,

Uneconomic project, High cost of

Technology

c. The government interventions should be taken to

improve the situation are:

Improving Company Commitment in the

system, the activities that can be done related to

this include:

1. MEMR, through DG Migas, sends a letter to

the top-level management of oil companies

related to "action plan for support zero

routine flarings." This "enforcement" letter

is setting a minimum zero routine flaring

implementation level.

2. SKK Migas conduct Technical assistant to

all oil company to a made an action plan or

program internally related to reducing gas

flare.

3. Workshop for Knowledge and Experience

sharing from Oil Company who already

conduct gas flaring reduction to all oil

companies.

4. Small-Group Discussion, which can be

done periodically, to discuss zero routine

flarings and mutually enrich each other’s

knowledge.

5. DG Migas engage development institution

to oil companies to improve the action plan.

6. Oil companies submit Zero Routine Flaring

2030 Action Plan to DG Migas.

7. DG Migas evaluate the action plan and

categories the action plan.

8. Benchmark success plan zero routine

flaring 2030.

9. Oil Companies execute the gas flare

utilization project.

Improving Accurate Data Measurement

1. DG Migas draft and publish technical

guidelines for measuring data and reporting

flaring among measurement standards

conducted by the oil and gas company.

2. DG Migas revise the report format flare

gas.

3. DG Migas conduct technical assistance to

calculate measurement and reporting.

4. Oil Companies and Gas Buyers report for

monthly and annual Reports.

5. DG Migas and SKK Migas publish gas

flare data on their official websites to

attract investors for gas monetization.

Evaluation of Indonesia’s Zero Routine Flaring 2030 Implementation using System Thinking Approach

Improve the bidding process will be

conducted by SKK Migas as follow:

1. SKK Migas preparation (brainstorming and

conceptualization) of the bidding process.

2. SKK Migas Drafting Criteria of Faster

Bidding Process.

3. SKK Migas Formulate procedure process

bidding.

4. SKK Migas conduct Regulation

Harmonization.

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