The global oil price, which is predicted to be far lower than US$ 100 per barrel, and a small fund for exploration are two challenges the oil and gas industry would face next year, according to the Indonesia Petroleum Association (IPA) on Wednesday.
The statement came after the association gathered for its 4-7th annual general meeting on Wednesday to elect a new President for a one-year term and to review its workin 2018.
Despite the challenges, the association’s newly elected President Tumbur Parlindungan said the association was still upbeat and would work closely with the government to overcome the problems, especially on the exploration issue.
“Next year we will strive to make our industry much more attractive [than other countries], after what has actually been a great year for us,” he said at a press conference.
The need for exploration to find oil and gas reserves in the country was voiced two days ago by Energy and Mineral Resources Minister Ignasius Jonan during the inauguration of Dwi Soetjipto as the new head of the Upstream Oil and Gas Regulatory Task Force (SKK Migas).
The message was timely considering around 77 percent of 89 onstream oil and gas blocks have seen declining production. Indonesia is a net oil importer because domestic oil output can only supply half of oil demand.
Aside from the low oil price and the exploration issue, IPA will also deal with Government Regulation No. 27/2017 on taxin-centives for exploration activities and implementation of the gross split scheme.
Throughout 2018, the association, which consists of 37 oil and gas companies and 116 services firms, has solved at least four government-related issues, says Ronald Gunawan, the former IPA president director.
“First, a partnership with SKK Migas and the Finance Ministry on gross split implementation and second, a revision of the Trade Ministry’s decision to include the oil and gas sector in the letter of credit policy” said Ronald, who is also the chief operating oflicer of publicly listed energy company Medco Energi.
The remaining two issues were the simplification of a state audit into the sector from three times by different auditors to only one time and cooperation With the Corruption Eradication Commission (KPK) on business ethics compliance.
Tumbur said the governments decision 'to simplify the production sharing contract from cost recovery to gross split was seen as a “non issue” inside the association.
ENI S.p.A [an Italy-based energy Firm]
“Whether it is cost recovery or gross split, We think it Would be no problem for us. For example just yesterday ENI S.p.A [an Italy-based energy Firm] has approve e conversion of their contract,” he added.
East Sepinggan block, offshore East Kalimantan
It was the contractin East Sepinggan block, offshore East Kalimantan that, according to Deputy Energy and Mineral Resources MinisterArcandra Tahar; needed to be switched to avoid debates about the cost of the project.
Tumbur, Who is also the president director of Saka Energy added that IPA was set to hold a strategic meeting in January 2019 to discuss other common issues in the upstream sector
Saka Energy is an upstream subsidiary of state gas firm PT Perusahaan Gas Negara. Data from SKK Migas show that investment in the upstream sector until September only reached $7.9 billion, or around 56 percent of the full year target of US$ 14.2 billion. Therefore, SKK Migas has predicted investment realization in the upstream sector to only reach $ 11.2 billion, or 78 percent of the full year target.
The global oil price, which is crucial for an oil and gas contractor to decide whether exploration is connnercially viable or not, has been predicted to hover at a stable rate of around US$ 65 to US$ 70 per barrel, said global energy think tank Wood Mackenzie recently Mackenzie believes the stable price is predicted to occur with the lower global oil supply due to the ongoing United States trade sanctions imposed on Iran, which will be complemented by the increasing oil production from the US.
Jakarta Post, Page-13, Thursday, Dec 6, 2018
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