For the past several weeks, Indonesia has been a hot topic on some of the mailing lists to which I subscribe. It’s also been the subject of frequent news items in some of the trade-focused journals that I read. I’ve been developing a theory that might explain some of the confusing developments.
For those who need to brush up on geography, Indonesia is a sprawling group of islands located between Australia and Southeast Asian nations like Thailand and Vietnam.
The below map shows where the nation sits and identifies its neighbors.
(Click to expand)
Indonesia has been an important oil and gas producer through most of the hydrocarbon age. Those resources have played a major role in its political history because of their ability to attract conquerors or colonial powers who desired the wealth or power that came with taking advantage of the materials. The British, Dutch, Japanese, Americans and Australians have all played roles.
Several decades ago, Indonesia regained local control over its natural resources. For many years, it was one of the few OPEC members located outside of the Middle East.
In the summer of 2008, Indonesia gave up its membership in OPEC. It had an aging infrastructure, and its production had fallen below its domestic consumption level. It was no longer a net exporter. Many observers recognized that its resources were not depleted, but also knew that major investments would be required to increase production levels.
ThorCon Announces MOU with Indonesia
At the beginning of December, I learned that ThorCon had signed a Memorandum of Understanding with Indonesia. For those who are not familiar with ThorCon, it is part of Martingale, Inc. a Florida based company that has been developing molten salt based power plant designs with a focus on making sure that their facilities can be built in a factory setting.
ThorCon plans to take full advantage of modern technologies and processes that continue to be developed and employed in industries like commercial aircraft construction, shipbuilding and large scale computing
I haven’t seen ThorCon’s MOU with Indonesia, but I’ve been told that it was the first step in creating a framework to allow ThorCon to build and test its initial design and to begin setting up the supply chain for series manufacturing. Some who learned about the MOU wondered why ThorCon had chosen Indonesia instead of the U.S. as the site of its pioneering development work.
Here’s my interpretation.
ThorCon leadership is confident, aggressive and impatient. (Those are compliments.)
They believe that the best way to learn to build high quality, reliable machinery of any kind is to design it quickly with sufficient margins to ensure safety and then to begin building as soon as possible. They recognize the limitations of learning, testing, and evaluating design choices on paper or in computerized models.
Many of the people at ThorCon know that the real world doesn’t precisely match the modeled world.
ThorCon has briefed the U.S. NRC on their design and construction approach. They have engaged in lengthy discussions with regulators on creating a reasonable path for siting and approving construction for a full scale prototype that could be “tortured, not licensed.” Those discussions have convinced ThorCon that there is little hope of creating a process in the U.S. unless there is a major conceptual shift at the NRC.
Therefore, ThorCon has been looking for other potential hosts.
Indonesia has a modest indigenous nuclear technology program. It does not operate any nuclear power plants, but it hosts a couple of research reactors and has a nucleus of well trained scientists and engineers. It has a bilateral 123 nuclear technology control agreement with the U.S. and a regulatory agency that apparently indicated a willingness to be taught and to grow.
Indonesia also has a domestic shipbuilding industry. The country has recently announced the intention to make substantial investments into that sector to modernize equipment and make it more competitive in the international market. ThorCon leaders have roots in large ship construction projects and plan to adopt the modular construction technology that industry has successfully learned to employ.
When I heard about the MOU, I was curious about how it was going to work out. I’m still a strong believer in the U.S. and our highly developed ability to seize opportunity, even if it means changing the way we historically do things.
Indonesia returns to OPEC
A week or so after the MOU announcement, I heard that Indonesia was returning to OPEC. That indicated that it was once more in a position to export oil and gas. After all, the ‘E’ in OPEC is “exporting”.
I initially felt more confident about ThorCon’s choice to locate their project there. Building nuclear power capabilities at home would allow Indonesia to reduce its domestic oil and gas consumption, thus freeing more of its production to be exported into the more lucrative international market.
Like many oil producers with strong, near dictatorial governments, Indonesia has a long standing policy of keeping oil and gas prices in domestic markets at a level well below international prices. This buys a certain amount of support for the government. It periodically attempts to improve the government’s financial position by raising fuel prices, the actions have been greeted with protests or violence.
Indonesian minister takes nuclear off table
On Saturday, December 12, 2015, less than two weeks after I learned of ThorCon’s MOU, I saw a headline from the Jakarta Globe that said Indonesia Vows No Nuclear Power Until 2050. It included the following quote.
“We have arrived at the conclusion that this is not the time to build up nuclear power capacity. We still have many alternatives and we do not need to raise any controversies,” Energy and Mineral Resources Minister Sudirman Said said on Saturday in Banda Aceh.
The minister spoke after the National Energy Council, a presidential advisory body, completed its latest National Energy Plan, which is to be signed by President Joko Widodo to become a presidential regulation.
There were numerous similar articles. The announcement generated a buzz on the mailing lists and in FaceBook discussion groups. I contacted ThorCon’s leader, Jack Devanney. Not surprisingly, his comment was “no comment.” I suspect numerous conversations are in progress as the people involved attempt to determine the impact of the announced decision on the future of their project.
Indonesia needs to burn gas in power plants
After reading the Energy Information Agency’s overview of Indonesia I understood that the country needs to burn natural gas in its power plants.
As shown in the map above, Indonesia is not well connected to natural gas export markets. It has some capacity to produce and ship LNG, but there are natural obstacles that make it difficult to build high capacity pipelines.
Indonesia’s geographic location and climate eliminates most–if not all–of the need to use fuels like gas in domestic heating. That, combined with its nature as a nation of volcanic islands subject to occasional earthquakes has slowed or completely discouraged efforts to build out any domestic distribution networks.
If it wants to increase its oil production by modernizing its infrastructure and drilling more wells, the activity will inevitably produce a growing quantity of associated gas that will need to be eliminated.
Safe options for natural gas disposal include injection back into the reservoirs, which is useful to a point but then becomes an expensive burden; flaring, which is wasteful and polluting; and finding or creating markets that will pay to take the gas.
It’s not hard to figure out why the final option is preferred. In a nation with virtually no retail market for gas, the most profitable course of action would be to build a small number of large pipes from production gathering areas to large power plants. Those power plants will then distribute natural gas energy over the electricity infrastructure.
It makes economic and political sense for Indonesia to avoid the domestic use of nuclear energy and to actively discourage others, especially its neighbors, from using it.
If companies like ThorCon succeed in their goal to make nuclear energy cheaper than coal–which is also a major export product and domestic fuel source for Indonesia–it will reduce the number of customers willing to pay profitably high prices for natural gas, coal and oil.
As my grandmother often said “That will never do.”
Where to go from here?
There’s no place like home.
U.S. nuclear technologists have several advantages over those in other countries. We naturally use the world’s business and technology language of choice. We have an effective democracy governed by the “rule of law.” We protect intellectual property rights. We host a substantial number of the world’s leading research universities. We have the world’s most extensive nuclear technology infrastructure. There are more people in the U.S. who have been trained to operate and maintain nuclear power plants than in any other country in the world.
My advice to companies like ThorCon is to cooperate in an effort to modify the U.S. nuclear regulatory paradigm from one that effectively discourages investments in nuclear energy to one that enables the growth of safe and emission free nuclear energy. Enabling the technology to flourish and provide benefits to the environment and to the economy is not the same as the kind of misguided promotional efforts that the AEC once pursued.
Private enterprises will do the promoting, but they need the regulator to establish clear guidance that is not the equivalent of “bring me a rock.” They need the government to revise the approval process so that it allows qualified and knowledgeable people to gain standing while discouraging interventions that are frivolous or specifically designed to delay.
Nuclear energy technology developers also need the regulator to recognize that rigorously testing full scale prototypes is mutually beneficial in providing the data needed to determine safety and to enable designers to more effectively make decisions aimed at making production, operations and maintenance easier. The drafters of the Atomic Energy Act recognized that truth and provided enabling language. The regulators should take advantage of the provisions to establish a workable, repeatable, effective process.