July 21, 2023
JAKARTA – Indonesia’s oil and gas investment in the first half of the year amounted to US$5.7 billion, just 36.67 percent of this year’s $15.54 billion target, according to the Upstream Oil and Gas Regulatory Task Force (SKK Migas).
Oil and gas investment in the January-June period was up 21 percent year-on-year (yoy) on the back of an upward trend in global upstream oil and gas investment, according to SKK Migas head Dwi Soetjipto.
SKK Migas deputy head Nanang Abdul Manaz blamed postponed well-drilling and other project delays as well as safety-related disruption for the fact that oil and gas investment was below target at the half-year mark.
“But, considering current calculations and forecasts, we hope investment will be close to the targeted amount by the end of the year,” Nanang told a press conference on Tuesday.
He added that the government had been willing to improve the investment climate as the country struggled to meet rising energy demand.
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Oil consumption in Southeast Asia’s largest economy is forecast to more than double to 3.97 million barrels of oil per day (bopd) by 2050, according to SKK Migas data, while natural gas consumption is expected to more than quadruple to 26,000 million standard cubic feet per day (mmscfd).
Dwi went on to say that the attractiveness of Indonesia’s oil and gas investment, specifically related to fiscal terms flexibility, had improved considerably thanks to the government’s decision to allow producers to choose production-sharing contracts (PSCs) in the last three years.
“But there are a lot of other things that need to be improved, especially in legal aspects […]. The revision of the oil and gas law will hopefully fix this,” he said.
The revision, which has been a work in progress for over a decade, is deemed imperative for establishing a steady legal basis for oil and gas investment in Indonesia.
The country has been struggling for years to drive upstream activity. Investment in the sector was still much higher at $20.72 billion in 2014 but then plunged to $10.17 billion in 2017, data from the Energy and Mineral Resources Ministry show.
Consequently, production has steadily declined, mostly due to aging wells and a lack of new discoveries, and was last recorded at 615,500 bopd in June this year, or 93 percent of the target, according to SKK Migas data.
Meanwhile, gas production totaled 5,308 mmscfd, 86 percent of the target.
Dwi projected global crude oil prices to trade between $75 and $85 per barrel in the next few months as supply would fall due to OPEC+ production cuts.
Goldman Sachs last month cut its forecast for oil prices by around 10 percent due to Russia’s supply glut and weak demand in China. The bank now expects the global oil benchmark Brent to be at $86 a barrel in December, down from the previous projection of $95.
Brent was trading at $79.53 a barrel around midday Jakarta time on Thursday.
“Relatively good prices are expected to encourage more aggressive investment,” Dwi said, “but at the same time, it would mean higher production costs because of increasing demand for key components of drilling rigs.”