It is impossible in the format of the Blog to cover such
a wide area; thus I will make some general observation, including some latest
developments, as well as give links to a number of documents and Web-sites.
Oil and Gas industry in Indonesia is considered to play a
strategic role. The following graph
shows that over the years the average contribution to Government of Indonesia
(GOI) is about 28%.
Indonesia’s proven oil reserves have fallen from 5.6 in 1992
to 3.7 billion barrels in 2012 according to BP’s annual report on oil and gas.
The report, “Statistical
Review of World Energy 2013,” was released today.
Presently oil production rate is declining at the rate of
3.5% per annum. 2013’s estimates are to have average daily oil output reach
900,000 bpd; to achieve 1.36 million barrels of oil equivalent per day (mboepd)
of natural gas. SKKMigas (an interim regulator), a
replacement for BPMigas, proposes that the government lower this year’s
oil and gas target to around 850,000 bpd and 1.24 mboepd of gas, respectively. According
to SKKMigas state revenues from the oil and gas sector this year would decrease
to around US$28 billion instead of the initial state budget target of $31.7
billion.
Source: 2012 PERFORMANCE & 2012 PERFORMANCE & 2013WORK PROGRAM
However, the country’s Oil and Gas sector is still very
competitive, as we can see from this table:
The five most competitive features of the Indonesian oil
and gas industry are as follows:
Source: Staring
Down the Barrel An investor survey of the
Indonesian oil and gas industry 2012 by PwC
And industry investors are positive in their outlook:
Source: Staring
Down the Barrel An investor survey of the
Indonesian oil and gas industry 2012 by PwC
So, what are the major reasons, and what has to be done.
Of course, the biggest problem, as it is in most countries of the world – is
the depletion of resources, ageing of equipment and absence of major new
reserves discovery and production.
The industry faces many challenges, but I will focus on
two views: one of them being Staring
Down the Barrel An investor survey of the
Indonesian oil and gas industry 2012 by PwC
From this survey, the five most critical challenges
facing the industry are as follows:
- Interference from other government agencies, such as the tax authorities
- Uncertainty over cost recovery and BP Migas / BPKP audit findings
- Contract sanctity
- Corruption, Collusion and Nepotism (“KKN”)
- Confusion over Law No. 22/implementing regulations
Source: Staring
Down the Barrel An investor survey of the
Indonesian oil and gas industry 2012 by PwC
The other view is expressed by consulting firm Wood
Mackenzie : two main challenges remain to be addressed in order to
reinvigorate Indonesia's upstream sector: the lack of incentive in its fiscal
terms and uncertainty regarding the future of some major Production Sharing
Contracts (PSC).
“Indonesia's fiscal terms rank amongst the most severe across the world. The average 86% government take is significantly higher than the global norm of 59%.” This illustrates evolution:
“Indonesia's fiscal terms rank amongst the most severe across the world. The average 86% government take is significantly higher than the global norm of 59%.” This illustrates evolution:
“Another obstacle to investment in Indonesia is the lack of clarity on PSC
expiry and potential extensions. Several important PSCs are due to expire
within the next decade, including North West Java Sea, Sanga Sanga, Jambi
Merang and Offshore Mahakam in 2017.”
This slide shows the view of Indonesian Petroleum Organization:
This slide shows the view of Indonesian Petroleum Organization:
It should be noted that SKKMigas names among the
challenges non-technical barriers: licensing, overlapping land, and disruption of
security.
PRACTICAL ACTIONS
GOI approved and started implementation of several programs to improve oil and
gas production. Short-term government programs to increase oil
and gas production are achieved through SKKMigas that is tasked to supervise
and manage annual and multi-year plans. Till 2016, there will be 12 flagship upstream
oil and gas projects consisting of 8 gas, 1 oil project and 3 projects that
produce oil and gas. From 12 projects, oil production is expected to increase
by 177 thousand barrels per day and gas production will be increased to 2,759
mmscfd.
EOR (enhanced oil
recovery) is one of the major ways. Opportunities to improve production
through EOR technology are extreme. Currently, out of 3.7 billion barrels of
Indonesian oil reserves as much as 1.7 billion barrels (46%) are concealed in
the working area of Pertamina. Furthermore, 78% of all Pertamina’s fields are
still a primary production exploitation
of oil in the field -- still using the natural reservoir energy to push oil
wells into production. This is the area where PT Petrosa Global Energy is actively engaged and I will describe it
in my further posts.
One of the areas, that has a good future is Eastern Indonesia. A good insight is
provided in the page Summary
of “Oil and Gas in Eastern Indonesia” Course by American Association of
Petroleum Geologists Universitas Gadjah Mada – Student Chapter (AAPG UGM-SC) with description of geology and
proven oil fields. This is well proven by cited PwC document, where most of respondents
looked at Eastern Indonesia:
A shift in exploitation of mineral resources from West to East was indeed confirmed
by Evita H Legowo, Director General Of Oil And Gas in February 2012:
This completes
Part I. In the next post, I will give a brief overview of recent developments
and provide links to valuable documents.
