Oil and Gas Industry’s Strategies to Survive

The Covid-19 pandemic has been one of the key factors that has pushed the oil price to a new low and is limiting the supply and logistics chain in the oil and gas sector around the world, including Indonesia. SKK Migas have stated that the pandemic has led to significant disruption to oil and gas operations and demand as well as to oil and gas lifting.

According to SKK Migas, Covid-19 is hampering material transportation, facilities, and inspection equipment. This eventually hinders oil and gas project engineering and construction activities and leads to delays in the schedule for facilities to come onstream. In addition, the pandemic has caused a delay in several activities such as operations planned shutdowns, well drilling and also well maintenance.

Referring to SKK Migas’ data, it shows that the oil and gas lifting as of the end of March is around 1.75-million-barrel oil equivalent per day (BOEPD) or 90.4% of the target which is mentioned in the State Budget. Oil lifting is around 701,600 barrel per day (BOPD) and gas lifting at 5,866 million standard cubic feet per day (MMSCFD).

To minimize the effects of Covid-19 on the upstream oil and gas industry, SKK Migas has reviewed several mitigation factors to ensure that oil and gas operations and projects will be run smoothly. They have talked with relevant regional governments to ease the oil and gas licensing process. Also, they have asked the Foreign Ministry as well as the Law and Human Rights Ministry to assist in the mobilization of oil and gas workers while continuing to consider the safety and health issues of all workers amidst the Covid-19 pandemic.

SKK Migas, along with the oil and gas companies in Indonesia, is also reviewing the approved work plan and budget (WP&B) in order to anticipate a lower oil price. As of now, around 14 contractors have revised their WP&B. SKK Migas is also encouraging the oil and gas companies to renegotiate their contracts with their services companies.

In order to give a fiscal stimulus, SKK Migas has also conducted discussions with the EMR Ministry and Finance Ministry. They have proposed some fiscal stimulus for the oil and gas companies as incentives are needed to encourage oil and gas investment amidst the pandemic. (*)