Covid-19 Dampens the Oil and Gas Industry’s Contribution to the Local Economy

The upstream oil and gas industry holds an important role as one of the economic drivers in Indonesia, especially for the local communities in the areas where the oil and gas operations are located. This industry creates multiplier effects for other business sectors but unfortunately, the Covid-19 pandemic has been affecting the industry and its contribution to the local economy.

As an example, the Tangguh Train-3 construction process is adjusting to the COVID-19 pandemic. In order to prevent the spread of the virus transmission in the field and maintaining the site COVID-19 negative, they have reduced the number of workers to abide the health protocol suggested by Government. Only workers who handle the critical roles such as safety, operations and project construction can remain working in the field.

In the Jambaran-Tiung Biru project, the contractor must recruit more local workers in order to speed up the project construction due to the local government’s decision on social restriction for workers coming from outside of the Bojonegoro regency.

At a national level, the pandemic is also affecting the state revenue especially from the upstream oil and gas sector. The Energy and Mineral Resources Minister, Arifin Tasrif, has stated that this year, the oil and gas lifting is projected to be lower than the government target.

Therefore, the government has decided to revise the state revenue target of the oil and gas sector, from IDR 192.04 trillion to IDR 100.16 trillion. This state revenue includes both non-tax and tax revenue. The non-tax revenue target was revised from IDR 127.31 trillion to IDR 53.29 trillion, and the tax target was cut down from IDR 57.43 trillion to IDR 43.75 trillion.

Referring to the above data, the EMR Ministry has predicted that the state revenue of oil and gas sector will be lower than last year. Last year, oil and gas non-tax revenue is around IDR 172.9 trillion while the contribution of the oil and gas sector is around IDR 115.1 trillion. (*)