In addition to production which continues to fall, upstream oil and gas investment has also not been able to answer the production problem. Investors need contract certainty for investment stability.
The situation in the upstream oil and gas sector in Indonesia is considered increasingly critical. Because production is ready to sell or [lifting both types of primary energy sources continues to fall from year to year. Therefore, improvements need to be made as soon as possible to increase production and attract maximum investment in the country.
Based on data from the Ministry of Energy and Mineral Resources, [oil lifting in 2019 recorded 746,000 barrels per day or below the target of 775,000 barrels per day. The realization of lifting natural gas is only 1,060 barrels of oil equivalent per day and still below the target of 1,250 barrels of oil equivalent per day. The decline in oil lifting has occurred since 2016, while natural gas lifting has continued to decline since 2014.
According to Pri Agung Rakhmanto, a lecturer at the Faculty of Earth and Energy Technology at Trisakti University, Jakarta, the upstream oil and gas situation in Indonesia can be said to be in crisis. In addition to declining production, upstream oil and gas investment in Indonesia is also in a crisis situation. If the situation is not improved enough, the condition of Indonesia's upstream oil and gas will sink even deeper.
"Crisis and critical. That is the condition of upstream oil and gas in Indonesia. Called a crisis because existing investments have not been able to answer the problem of production which continues to decline. It is called critical if this situation continues, "said Pri Agung.
In terms of upstream oil and gas investment, during 2019 it collected 12.5 billion US dollars or lower than the target set, which was 13.4 billion US dollars. In 2018 the realization of upstream oil and gas investment will reach 12.6 billion US dollars. In the last five years, the highest investment was recorded in 2015, amounting to 17.9 billion US dollars.
"Indonesia has not been able to attract enough investment from world-class upstream oil and gas actors, both for new oil and gas reserve discovery projects and development projects to increase production. Upstream oil and gas investment has been around 60-70 percent, only for existing routine operational costs, "Said Pri Agung.
Not a Commodity
Pri Agung added, improvements in upstream oil and gas investment should start from the perspective of the state managing its natural resources. According to him, oil and gas resources should be used as capital for development in the country, not as an export commodity to collect foreign exchange In addition, policy improvements in taxation, fiscal and oil and gas revenue sharing are also urgent. Indonesia's oil and gas production has not been able to meet domestic needs.
The consumption of national oil will reach 1.5 million barrels per day, while domestic oil production is less than 800,000 barrels per day. LPG consumption is around 7 million tons per year, half of which must be imported. This condition causes Indonesia to often experience a deficit in its oil and gas trade balance.
Last weekend, in Jakarta, Energy and Mineral Resources Minister Arifin Tasrif said the government would no longer require gross profit-sharing schemes in the auction of new oil and gas working areas.
The contractor is given freedom of choice, namely a gross split and cost recovery that can be recovered (cost recovery). Previously, for new oil and gas working areas, the revenue sharing that the government imposed on contractors was gross split.
"There are already two schemes (gross split or cost recovery), but the cost recovery scheme will be fixed first," Arifin said when asked for a profit-sharing scheme at the upcoming oil and gas working area auction.
Previously, at the annual general meeting of the Indonesian Petroleum Association (IPA), IPA Vice President Ronald Gunawan alluded that investors needed contract certainty for investment stability. Because upstream oil and gas investment is a capital-intensive and high-risk investment. The stability of the contract is believed to increase the attractiveness of Indonesia's upstream oil and gas investment in the eyes of investors.
"To simplify the bureaucracy, in the last two or three years there have been positive signals. We hope that there will be continuous improvements in the future, "said Ronald.
Kompas, Page-13, Tuesday, Jan 14, 2020
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