Foreign Investments
BISNIS INDONESIA discussed
a certain slowdown of foreign investments this year, noting that investors now
are awaiting the results of the next year’s presidential elections. Several
interesting points are mentioned:
- There is a lack of foreign
investors who would like to be a pioneer in an industry.
- The lack of labor absorption
by domestic investors, when compared to foreign investors. In Q2/2013 foreign
investors had absorbed 386,566 jobs, while domestic investors only employed
239,810 workers.
That is why foreign
investments are important.
Thus, the problem of incentives for investors was raised
this week. This is a hot issue in Oil & Gas industry (as it is seen in the
matter of oil refineries). At this time,
the Indonesian government has put forward certain fiscal incentives to draw the
investors in - goods and equipment for upstream oil and gas activities are now
exempted from customs duties and value-added tax.
So, this week announcement of Bambang Brodjonegoro, Acting
Head of Fiscal Policy Agency, was widely commented and discussed. Mr. Brodjonegoro
revealed that the Ministry is preparing new tax incentives aimed at increasing
of investment attractiveness of Indonesia:
- The bigger investment, the better incentives.
- Tax holidays (exemption to pay taxes for employers for
a certain period) – currently valid from 5 to 10 years. They are applied to base
metal, oil refining and basic petrochemical, machinery, renewable energy and
telecommunication equipment — with a minimum value investment of Rp 1 trillion (US$97.08
million), plus store at least 10% of those funds in Indonesian banks. New
regulation will have some relaxation (incentives for investments less than Rp 1
trillion), especially for some industries that require investments for longer
period; or for industry with a small minimum value of investment.
- Tax allowances (relief or tax reduction for employers for
a certain period) – reduce taxable income up to 30% of overall investments
realized over six years, are available for 129 labor-intensive business sectors
in remote areas with a minimum investment of Rp 50 billion. This would be made
more attractive, since currently there are lots of procedural issues
- The so-called intermediate industries (that produce
semi-finished materials) will see a combination of incentives: in tax and
import duty areas.
New regulations regarding tax incentives will be
announced at the end of 2013 and will take effect in early 2014.
Oil & Gas Exploration is a Must
- Rudi Rubiandini, SKK Migas Head, announced this week that the agency instructed all operators and field contractors to boost exploration in order to find new reserves. He cited the limited availability of resources - according to recent estimates Indonesia will run out of gas and oil in respectively 44 and 12 years. The alarming figure was released - new discovered oil reserves are only 21.3% of the total potential.
- It was reported that SKK Migas is working with the Ministry of Defense to conduct surveys of 14 oil and gas fields (working Areas – WK) along the borders of Indonesia. These are:
1. WK Ambalat with operator ENI, the Italian oil and
gas company.
2. WK East Ambalat with operator Chevron.
3. WK Anambas with operator AWE.
4. WK Arafurasi with operator ChonocoPhillips.
5. WK Cakalan wuth operator Lundin.
6. WK Serica East Seruway with operator
KrisEnergy.
7. WK grouper with Pearl Oil operator.
8. WK North East Nantuna with Titan operator.
9. WK Tuna with operator Premier Oil.
10. WK Octopus with operator Lundin.
11. WK Sebatik with Star Energy operator.
12. WK South East Energy Parung Hammers, by operator
CNOOC.
13. WK North Sokang, with North Sokang Energy
operator.
14. WK South Sokang, with Black Platinum operator
- Discussion this week was centered on the SKK’s pessimistic revision of oil lifting target in the 2013 to 840,000 barrels per day (from previous 900,000). One of the major causes are the maintenance problems in some of oil and gas fields (Tangguh, Papua; Bontang, East Kalimantan; Cilegon, Banten). This definitely leads to decrease of state revenue by Rp18 trillion. However, Mr. Rubiandini notes that state revenues still be compensated by raises of the oil price. As an addition – three new wells at the West Madura Offshore Block would provide increase.
- To increase production, nine different projects had been approved by SKK Migas. These are Plan Of Development (POD), Plan Of Further Development (POFD), and Put On Productions (POP):
1. POP-1 wells Bamboo
Mountain (Pertamina EP)
2. Well Acacia Large
POP-1 (Pertamina EP)
3. POD TBR-JAM-CDN (Mobil
Cepu Ltd.)
4. POFD Klalin
(Petrochina Bermuda)
5. POFD Bekapai Phase 2A
(Total E & P)
6. POP-1 wells Bengal
(Pertamina EP)
7. Northern Harvest POP-1
(PetroChina Jabung)
8. POD Complex Phase-1
Nail Elephants (Pertamina EP)
9. POFD Field Sepinggan
(PT CPI)
The other ones are still in
dicusssion:
1. POFD Minas Field (PT
CPI)
2. POFD Gajah Baru Field,
Dragon, Iguana (Premier Oil)
3. POFD Field Lampake
(Vico)
4. POFD Bekapai Phase 2B
(Total E & P)
5. POFD Field Abab
(Pertamina EP)
6. POFD Field King
(Pertamina EP)
7. POFD Field Gods
(Pertamina EP)
8. Well Tapen POP-01
(Pertamina EP)
9. Lyrics POFD Field
North (Pertamina EP)
- Pertamina Asset 2 reported that they plan to drill 22 new wells to support an increase in oil production of 4,000 barrels per day this year. That requires investment of approximately U.S. $ 4 million - $ 5 million per well. Pertamina Asset 2 is located in South Sumatra, and includes Prabumulih Field, Pendopo Field, Field Rimau and Field Adera. Total oil production generated by the assets reach 22,000 BOPD, gas production assets in Pertamina 2 reach 460 MMSCFD and 388 MMSCFD of gas shale. In addition to drilling of new wells Pertamina EP Asset 2 performs enhanced oil recovery (EOR) procedures on 18 wells.
Mahakam and 51% ownership by Pertamina ?
Continuing the story of Mahakam
Block. This week the data was
released showing that Pertamina has the ability to operate and manage
offshore oil and gas blocks. PT Pertamina Hulu Energi West Madura Offshore (PHE
WMO) managed to increase its production by 70% in the last two years.
In May 2011, WMO block
production was 13,000 barrels; now is 22,200 barrels per day – that is 70% rise.
Thus, Pertamina hopes that the Government will assign to it management of
Mahakam block after the contract with Total E & P is completed in 2017.
WMO block oil production will
continue to be improved – it is expected that by the end of 2013 production
could reach 28,000 bpd. 21 production wells and nine exploration wells are
planned to be drilled this year. In addition, PHE WMO new project is to
complete installation of new subsea pipeline connecting several new production
platform with Poleng Processing Platform (PPP).
Pertamina had
earlier prepared a development plan in Mahakam Block, East Kalimantan; with
the plan to get 51% Participating Interest (PI) of that block in 2017.
New Problem in Operations?
I have described in previous
posts some problems that Indonesian Oil & Gas Industry faces (red tape,
difficulties with local administrations, etc.). As an example, by the end of
May, PetroChina had access to 14 of its oil and gas wells in Sumatra, producing
433 barrels of oil and around 11 million standard cubic feet of gas daily,
blocked by a local government hoping to secure energy supply.
This week a new one surfaced -
theft. Pertamina was forced to shut down its Tempino-Plaju pipeline in Sumatra
(a week after start of its operations) following illegal tapping of the line.
This is recently restored pipeline that delivers crude from wells in Jambi
province to Pertamina’s Plaju refinery in Palembang, South Sumatra. It is
interesting to note that this new pipeline was constructed to replace old ones
that were damaged by illegal tapping.
Average losses thanks to the
oil theft are up 18% from the 12,000 barrels of oil delivered per day. The
losses amount to $1.7M just in one week.
This goes on for quite a while, but recently, according
to Pertamina, the business became well planned and organized. The
company reported to police 144 times, but only 4 cased reached the court.
BISNIS INDONESIA reports that financial loss due to oil theft continues to
increase each year: 2010 -- IDR15 billion;
in 2011 - IDR177 billion 2012 - IDR300 billion; first half of this year, the
loss reached IDR37 billion. Pertamina asked the Army to cooperate, but this
cannot deter perforating of 2 meter depth line.
Oilfield Equipment Market is USD 93.74 billion
According to a new market
report published by Transparency Market Research "Oilfield Equipment
Market (Drilling Equipments, Field Production Machinery, Pumps and Valves and
Other) - Global and U.S. Industry Analysis, Size, Share, Growth, Trends and
Forecast, 2012 - 2018," the global market for oilfield equipment was
valued at USD 93.74 billion in 2012 and is expected to reach USD 117.37 billion
in 2018, growing at a CAGR of 3.8% from 2012 to 2018.
IPOs for Oil & Gas Companies
There is a good example for
Oil & Gas Companies to be listed in Asia. Rex International Holding
Limited, an independent oil exploration firm, launched an initial public
offering (IPO) on the Catalist Board of the Singapore Exchange Securities
Trading Limited to raise up to $67.7 million. The public offer consists of 2.5
million shares at $0.40 each and including over-allotment, Rex is expected to
place out 168 million shares at $0.40 for its proposed listing on the Catalist
Board. The IPO opened July 22 and will close July 29. Most of the proceeds will
be used for exploration and drilling (In
this page there is a good description). BISNIS INDONESIA reported this
week that some Pertamina’s companies are ready to be listed on Indonesian Stock
Exchange: PT Pertamina Gas, PT Geothermal Energi, PT Pertamina Drilling Services
Indonesia.
