Jakarta, 27 May 2019 – With the opportunities and challenges that lie before the country, Indonesia is poised to restore the heydays of the oil and gas sector, but there are still works that the government should do.
One of them is to restore the interest and enthusiasm of global oil and gas investors to carry out exploration and exploitation in Indonesia. The government is optimistic about this matter because there have been recent commitments from several contractors to carry out exploration and exploitation activities.
The President of the Indonesian Petroleum Association (IPA), Tumbur Parlindungan, (26/05) acknowledged that national proven oil and gas reserves are still relatively huge in the Southeast Asia region, not to mention in Asia as a whole.
"However, it is necessary to find and prove additional oil and gas reserves by carrying out exploration. Unfortunately, in the last 15 years, only a few exploration activities have been conducted in Indonesia. In fact, other countries with lower oil and gas reserves than Indonesia have improved their capability to attract oil and gas investments," said Tumbur.
This should be a concern for all stakeholders, considering that the portion of Oil and Natural Gas in the national energy demand is still the highest compared with coal or new renewable forms of energy. Based on the General National Energy Plan (RUEN), the target for the fossil energy mix in 2025 will be 47% and 43.5% in 2050.
According to RUEN, national oil production is expected to reach 567,000-barrel oil per day (BOPD) in 2025, and 698,000 BOPD in 2050. Meanwhile, the demand for national crude oil refinery capability in 2025 will reach 2.19 million BOPD and increase to 4.61 million BOPD in 2050.
With the assumption that 100% of national oil production is to be used to meet the domestic market demand, the national crude oil imports in 2025 are estimated at 1.67 million BOPD and 3.92 million BOPD in 2050.
Regarding the recent conditions, particularly with regard to oil and gas reserves, there has been an increase for natural gas reserves and a decrease for oil. According to data from the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), the oil reserves for last year was 226.62 Million Stock Tank Barrels (MMSTB), or down by 334.05 MMSTB compared to the reserves in 2017. While for natural gas, the reserve in 2018 was 3,387.81 Billion Standard Cubic Feet (BSCF), skyrocketing from 578.47 BSCF from the previous year reserves.
In an attempt to boost extra reserves or oil production, Indonesia should learn from Malaysia. According to IEA, Malaysia has succeeded to maintain its oil production at around 700,000 BOPD during the period of 2000-2018. Based on data from theglobaleconomy.com, Malaysian oil production in 2000 was 755,700 BOPD while in 2018 was 736,280 BOPD. Oil production of under 700,000 BOPD only happened in the period between 2011-2014.
In terms of Malaysian oil reserves, there was a slowdown by 20% during the period of 2000-2016 or from 4.5 billion barrels to 3.6 billion barrels. However for Indonesia, there was a significant decrease for oil reserves from 5.1 billion barrels in 2011 to approximately 3.3 billion barrels in 2016.
Based on these conditions, the development of a new oil field with the production size equal to the Banyu Urip Field or the discovery of significant oil and gas reserves in Blok Sakakemang, South Sumatra, has created a lot of optimism. Last February, Repsol announced that the confirmed natural gas reserves in Sakakemang Block were 2 trillion cubic feet (TFC).
“In such a situation, other countries reaction would have been to take some measures like improving their fiscal regime. Therefore, investors have various investment options. If they think that Indonesia is not the perfect place for investment, unlike other countries, they will definitely invest in other countries.’ said Tumbur.
In the future, Indonesia is expected to maintain its efforts to improve the quality of upstream oil and gas investment in order to attract global investors to explore or to expand the national oil and gas blocks. Moreover, we have had success in the past in terms of attracting global investors for projects such as LNG Bontang, Rokan Block, and Mahakam Block.
Despite upstream oil and gas industry being categorized as high risk, investors are still looking for investment places that offer bigger reward than the risk. This is a challenge for the government to ensure that Indonesian oil and gas remains its business attractive on a global basis and attracts investors to invest in Indonesia.
“The risk might be the same, but what if the potential project economic elsewhere is better? Another way to attract investors is by commencing large projects which now are still under discussion, such as Indonesia Deepwater Development (IDD) and Abadi LNG Project. This way will surely give investors a lot of confidence to carry out exploration or expansion here,” added Tumbur.
He is optimistic that the future of the national upstream oil and gas industry will be bright with the support from all parties and stakeholders. An attempt to ease policies that are not pro-business as well as promoting and introducing the findings around national oil and gas areas can be the enticements to attract the investors.
“I think that it is not only in the ASEAN, but Indonesia is also considered vital for the oil and gas sector in Asia. We just have to find out how to attract the big players,” said Tumbur.
On a different occasion, the Head of Program and Communication Division of SKK Migas, Wisnu Prabawa Taher, revealed the amount of Definite Work Commitment (Komitmen Kerja Pasti/KKP) and Definite Commitment attained in the Cooperation Contract of USD 1.14 billion for several exploration activities such as 47 G&G studies, 79 Exploration Wells, 38 Seismic Surveys, and 4 other Surveys during the 2018-2026 period in 24 Working Territories.
“This exploration (KKP only) is not only established in the Working Area but also in the open areas to drive the discovery of new oil and gas fields as the result of exploration,” Wisnu revealed.
Currently, SKK Migas is taking further action towards the discovery of oil and gas fields as the result of exploration. Wisnu revealed that the action had been recorded in the reserves replacement ratio that reaches 105% (2018) on 45 PODs/POFDs approvals with reserves total of 831.5 million per Barrel of Oil Equivalent (BOE). “In 2019, we expect the ratio can reach over 100%. As a highlight, until April 2019, there are 9 PODs/PFODs which has been approved with reserves total of 115 million per BOE,” said Taher.
Furthermore, SKK Migas expects the field development may become more active with various incentives offered in the PSC Gross Split scheme, such as field location, depth, and condition of the reservoir, infrastructure availability, other material content, oil density, Tingkat Komponen Dalam Negeri (TKDN) / Local Content Level, etc.
The Indonesian Petroleum Association (IPA) in a non-profit organization established in 1971 and has become the main voice of the upstream oil industry sector with 42 company members representing nearly all national oil and gas production, 107 service company members of the association, and more than 1,000 individual members.
The IPA is the government’s partner in developing the upstream oil and gas industry through proper policy formation and also facilitates consultation, coordination, and collaboration between main stakeholders, government and other entities to improve the development of the oil and gas industry in Indonesia.
The IPA also promotes the education continuity and knowledge transfer to contribute towards the national capacity development through technical courses, workshops, field trips, and the annual IPA Convention and Exhibition.
The IPA Convention and Exhibition is the largest annual oil and gas event in Southeast Asia and has been held annually for 42 years. The Convention and Exhibition gathers the policymakers and regulators, experts, investors, operators, and supporting sectors to exchange ideas, view the latest technology and cooperate together to encourage future upstream investment in Indonesia.
For further information, please contact: