• 3 minutes Shale Oil Fiasco
  • 7 minutes "Leaked" request by some Democrats that they were asking Nancy to coordinate censure instead of impeachment.
  • 12 minutes Trump's China Strategy: Death By a Thousand Paper Cuts
  • 16 minutes Global Debt Worries. How Will This End?
  • 5 hours americavchina.com (otherwise known as OilPrice).
  • 25 mins Democrats through impeachment process helped Trump go out of China deal conundrum. Now Trump can safely postpone deal till after November 2020 elections
  • 8 hours Forget The Hype, Aramco Shares May be Valued At Zero Next Year
  • 23 hours Natural Gas
  • 1 hour Iraq war and Possible Lies
  • 13 hours Joe Biden, his son Hunter Biden, Ukraine Oil & Gas exploration company Burisma, and 2020 U.S. election shenanigans
  • 1 hour POTUS Trump signs the HK Bill
  • 2 days Everything you think you know about economics is WRONG!
  • 2 days Wallstreet's "acid test" for Democrat Presidential candidate to receive their financial support . . . Support "Carried Interest"
  • 4 hours READ: New Record Conoco Eagleford Vintage 5 wells, their 5th generation test wells . . . Shale going bust . . . LAUGHABLE
  • 18 hours My interview on PDVSA Petrocaribe and corruption
  • 1 day Aramco Raises $25.6B in World's Biggest IPO
  • 2 days 2nd Annual Great Oil Price Prediction Challenge of 2019
  • 1 day Winter Storms Hitting Continental US
Alt Text

OPEC Optimism Lifts Oil Prices

Oil prices inched higher on…

Alt Text

The Toughest Part Of The OPEC Deal

OPEC+ agreed to deepen output…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Indonesia’s Ailing Oil Sector Needs Urgent Overhaul

Indonesia’s oil industry is languishing, it’s fields are depleting and it desperately needs investment, but unlike another up-and-coming oil major—Argentina—it’s not willing to do what is necessary to lure in big foreign money.

Indonesia’s oil industry contributed just 3 percent of GDP last year, from almost 15 percent in 2014 and as much as a quarter back in 2006. The decline in production has been steady since the 1990s, thanks to a sharp drawdown on exploration and new investment—despite the fact that the county’s energy needs have been growing steadily. Now, Jakarta is trying to turn things around.

Indonesia is currently producing around 800,000 barrels of crude daily, which constitutes half of what it consumes every day. This compares to a little over a million bpd in 2010. The local fields are mature, well on their way to depletion, and the state energy major, Pertamina, has set its sights on international expansion to compensate for decline.

Since 2014, the company has grown its overseas production capacity to 150,000 barrels of oil equivalent daily through acquisitions and partnerships. The latest acquisition, of French energy company Maurel & Prom, added 30,000 bpd to its capacity. To date, the company has exposure to nine oil-producing countries, including Algeria, Iraq, Tanzania, and Nigeria--and it’s negotiating the acquisition of two oilfields in Russia.

Meanwhile, the government is trying hard to attract investors for untapped oil and gas reserves.

Related: The $50 Billion Backlog Of U.S. Energy Projects

In April, the Energy and Mineral Resources Minister Ignasius Johan announced a US$200-billion foreign investment plan, offering oil companies the change to bid for 14 untapped oil and gas deposits.

To sweeten the deal, Jakarta said it would introduce incentives such as the tax-free import of oilfield equipment, easier cost recovery, plus a revised tax regime. However, according to analysts quoted by Bloomberg, investors still view Asia’s fastest-growing economy as a difficult place to invest in because of bureaucracy.

Indeed, there have been few takers of the 14 new oil and gas deposits.

In July, the country’s energy sector regulator, SKK Migas, said it was in talks with some interested parties, but no final deals were sealed. Why? The very overhaul that was supposed to lure in more investors backfired, according to the FT. The overhaul involved a revision of contracts, envisaging an end to a system that saw the government reimburse explorers for all their costs. The new “gross split” regime seeks to ensure a fairer return for Indonesia, Johan explained at the time, after years of misuse of the old cost-recovery system.

Another potentially major oil producer, Argentina, is offering foreign energy firms above-market prices for the gas they extract from its huge Vaca Muerta field as well as tax incentives to motivate them to come and explore. Indonesia seems less inclined to adopt the “whatever it takes” approach.

Pertamina is growing abroad, and it is also expanding its local downstream operations in partnership with Aramco and Rosneft.

According to Johan, Indonesian oil production should hit 1 million barrels by 2019. Whether this happens or not, at the pace its economy is growing, 5 percent annually, Indonesia will remain a net importer of crude for the foreseeable future.

Related: Natural Gas Prices Poised To Rise As Exports Boom

Meanwhile, by the way, Indonesia is not shunning renewable energy. Far from it – the country plans to derive 23 percent of its energy from renewable source by 2025 and 31 percent by 2050, according to the International Renewable Energy Agency. These targets, however, would require annual investments of US$15 billion annually until 2030. According to IRENA, the benefits from renewable energy adoption would outweigh the costs.

Still, with energy consumption growing at the fastest rate in ASEAN, Indonesia will likely continue to be dependent on fossil fuels for quite a while, which increases the urgency of attracting new investments.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play