STRATEGIC ENERGY PORTFOLIO OPTIMIZATION FOR NATIONAL OIL COMPANY AMIDST UNCERTAINTIES AND CLIMATE CHANGE

• Main Author: Septa Rianelly, Prenita
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/68227
• Institution: Institut Teknologi Bandung

Indonesia as Emerging Market and Developing Economy (EMDE) country has high dependency on oil as primary energy source to drive the economy for more than 200 million population. Since the year 2003 Indonesia has been a net oil importer to fulfil its energy demand due to the declining in national oil production, where this condition will pose a great thread to national energy security. Company as National Oil Company aims to ensure Indonesia energy resiliency and self-sufficiency. Oil price volatility has becoming the most importance source of uncertainty for the company to fulfil national energy demand, where the dynamic will influence its strategic energy portfolio performance, since more than 50% of its energy portfolio consist of oil. Demand cut during COVID-19 pandemic crisis has pushed the oil price to the lowest in history, impacting oil companies around the world including the company that lost its profitability for more than 50% in the year 2020. Economic downturn in the year 2020 has created opportunity to accelerate the transition towards low-carbon emission align with Indonesia’s updated Intended Nationally Determined Contribution (INDC) to the United Nation Framework Convention on Climate Change (UNFCCC) in the year 2021, committed to reduce GHG emission to 29% unconditionally and 41% conditionally with international support in Business as Usual (BaU) scenario in the year 2030, where the company has committed to reduce ±78% of GHG emission by the year 2030 from the year 1990 level to support Indonesia GHG emission reduction target. Facing the uncertainty of oil price volatility, loss profitability during COVID-19 pandemic in the year 2020, technological advancement and the declined cost of renewable energy, countries increasing commitment towards net-zero emission target, global investment trend of Environmental, Social and Governance (ESG), and oil reserves structural declined projection, the company will require strategy to optimize its energy portfolio to enhance resiliency, agility and flexibility to create new unlock new value and bigger impact for the stakeholders. Energy portfolio optimization scenarios shows that gradually optimizing ±10-25% of new and renewable energy portfolio will enhance company profitability in the long-run, by building strong-integrated energy network from upstream to downstream to provide low-carbon energy solutions align with government regulations support, demand-side efficiency as well as carbon market price implementation that expected to reach minimum ±US$ 50-70/tonCO2eq to reduce GHG emission. Continuous portfolio evaluation, carefully calculating cost and benefit analysis, risks management and mitigation, R&D and innovations, organizational capabilities as well as ‘good governance’, are the success factors for the overall strategy executed amidst increasing uncertain conditions to ensure company sustainability in the long-run.