Upstream oil and gas investment in Indonesia is believed to be still prospective, despite a number of challenges due to fluctuations in world oil prices and the Covid-19 pandemic. Moreover, the government has also given the flexibility to investors to choose the form and production sharing contract in oil and gas activities.
The policy is believed to provide legal certainty and increase oil and gas investment in Indonesia. But of course, it must be punctuated by the right strategy and oil and gas investors to survive and get out of the crisis.
Arcandra Tahar
Former Minister of Energy and Mineral Resources (ESDM) for the 2014-2019 period Arcandra Tahar said investment in upstream oil and gas was not merely a matter of the political situation in a country. According to him, the majority of investors will enter the oil and gas project which is considered to provide good profits for the company.
"Investment does not recognize citizenship. That is, where there is a profitable investment, investors will enter, "he said.
the Masela block
Referring to the news of Shell's departure from the Masela and Chevron Block projects on the Indonesia Deepwater Development (IDD) project, Arcandra said many factors could trigger the decision. Comprehensively the decision could be influenced by the shifting focus of the company relating to economic value. But the withdrawal of two global oil and gas companies from the project in Indonesia cannot be used as a reference that investment conditions in Indonesia are not good.
"Can you see that their assets (Investors) are sold abroad? I think so. What does it mean, if we only look at it from one side, the investment climate might not be okay. "
He considered the mix of business portfolios in oil and gas companies could be one strategy to get out of the crisis. According to him, the weakening of world oil prices and falling demand that occurred some time ago along with the Covid-19 pandemic was one of the extraordinary events.
However, basically the oil and gas industry is a business whose principles always fluctuate, so there should be mitigation to go through difficult times. Was this not prepared in advance by the oil and gas company? I think it's been prepared, "Arcandra said.
For this reason, the business portfolio mixes between upstream and downstream needs to be balanced considering that there are still oil and gas companies that can get profit, in a state where oil prices are skyrocketing or weakening. According to him, this was also done by large-scale global oil and gas companies such as Shell and Chevron. In addition, the oil and gas companies have begun to apply the trend to anticipate difficult times.
"So a strong company, a balance between upstream and downstream. Even if a medium company has a good strategy, besides having a business in the upstream, they also anticipate it in the downstream, "he explained.
Dwi Soetjipto
SKK Migas Head Dwi Soetjipto projects that oil and gas investment this year will only reach US $ 11.6 billion, down 16% from the target of US $ 13.8 billion. According to him, global upstream oil and gas investment trends this year are also projected to fall by around 30% to the US $ 228 billion from the initial 2020 target of US $ 325 billion.
"So in Indonesia the decline is far better than the global upstream oil and gas trends," he said.
PORTFOLIO CHANGE
Both Shell and Chevron are known to change their investment portfolios in the upstream oil and gas sector in the world, including for projects in Indonesia. Chevron Asia Pacific External Affairs Advisor Cameron Van Ast said it was giving a signal to release its participation in the IDD project.
He revealed that the plan had been reviewed since the beginning of this year and he dismissed that the decision was related to the acquisition of Chevron in Noble Energy shares on July 20, 2020.
PT. Chevron Pacific Indonesia's
Chevron Pacific Indonesia's Corporate Communication Manager Sonitha Poernomo added that the Phase 2 IDD project could not compete for capital in Chevron's global portfolio. Meanwhile, Shell was quoted from the official website of Shell Global, dividing the oil and gas company's business into the upstream business, integrated gas, renewable energy, and downstream business.
Sonitha Poernomo
In line with Arcandra, Secretary-General of the National Energy Board Djoko Siswanto is optimistic that Indonesia's upstream oil and gas sector is still in good condition and attractive to investors.
Hilmi Panigoro
On the other hand, President Director of Medco Energi Hilmi Panigoro revealed that Indonesia's biggest challenge to bringing in investment in the upstream oil and gas sector is legal certainty which is more attractive to investors.
According to Hilmi Panigoro, there are many investors who prefer other countries than Indonesia even though the tax conditions and political conditions are not better. Hilmi said this could happen because the investors considered that they did not have more risks given the clear legal certainty.
"For example, now the government is changing its paradigm, energy is not a source of revenue, then gas prices are lowered, but the contractor's rights must be maintained so that investors believe. So whatever the form of the regime, what is important right now is how this new law can be a guarantee, so the signed agreement must be maintained, "he explained.
Regarding oil and gas production sharing contracts, ESDM Minister Arifin Tasrif issued Minister of Energy and Mineral Resources Regulation No. 12 of 2020 concerning the Third Amendment to the Minister of Energy and Mineral Resources Regulation No. 8 of 2017 concerning Gross Split Production Sharing Contracts.
In Article 2 paragraph (2) of the Ministerial Regulation, it is explained the form and cooperation contract can use Gross Split, Cost Recovery, or other cooperation contracts. Arifin also abolished the provisions regarding the management of the Work Area that ended the contract period and was not extended, the government imposed a Gross Split for the next period. In addition, in the case of Work Areas that will expire in the contract period, the government can stipulate all cooperation contracts or Gross Split.
Bisnis Indonesia, Page-10, Monday, August 3, 2020
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