Indonesia’s infamous red tape and lack of transparency have led to reluctance among oil and gas companies to continue investing in the upstream industry, leaving state oil and gas firm Pertamina to take charge. A recently released report by energy research group Wood Mackenzie states that up to 35 production sharing contracts (PSCS) worth around US$10 billion will expire in the next decade. The PSCs amount to over 1 million barrels of oil equivalent per day (boepd) of this year’s production.
Wood Mackenzie upstream oil and gas analyst John Utama told The Jakarta Post that uncertainty remains one of the biggest barriers to up-stream investment in Indonesia, with its lack of transparent guidelines on PSC extensions and clarification on the abandonment and site restoration obligations for expiring PSC. The lack of interest is clear in several offers the government has made in the past year; when the Energy and Mineral Resources Ministry put 14 conventional oil and gas blocks up for tender, with seven up for direct offers and the remaining up for open bidding.
Since then, only three direct appointment blocks were picked up, while the remaining seven attracted no offers. Utama claimed that many companies currently investing in the Indonesian oil and gas sector cannot justify further investment in the country due to more prospective options abroad. They have other investment options that offer more attractive returns or with lower risk levels. In the exploration bid rounds launched in recent years, interest has been limited, even though Indonesia has made efforts to improve the fiscal terms on offer,” he said. “The results imply the attractiveness of the fiscal terms does not surpass the geological or regulatory risks associated with doing business in Indonesia.
The decreasing trend of investments in the upstream oil and gas sector is not new, with last year’s investments in exploitation fields dropping by 20 percent to $15.1 billion from the previous year. Meanwhile, investment in exploration fields only amounted to $ 515 million last year due to sluggish growth in global oil prices. The trend continues as the Up-stream Oil and Gas Regulatory Special Task Force (SKK Migas) reported that a measly $ 367 million was invested in exploration activities in the first half of this year, equal to only 6.4 percent of the total investment of $5.7 billion in the oil and gas industry.
Wood Mackenzie’s report states that Pertamina will play a key role in expiring assets with strategic value to the country given its interest in meeting aggressive near to mid term production targets, reaching 2.2 million boepd in 2025. Mature projects such as Mahakam in East Kalimantan, Corridor in South Sumatra and Jabung in Jambi, which account for over 80 percent of expiring PSCS. already have extensive infrastructure in place and the potential to deliver stable cash How. According to an existing regulation issued in 2015, Pertamina has
Jakarta Post, Page-13, Tuesday, Dec,20,2016
No comments:
Post a Comment