Crude Oil

JAKARTA (TheInsiderStories) – Indonesia’s Special Task Force for Upstream Oil and Gas Business Activities still optimistic the upstream oil and gas investments investment could reach US$11 billion in this year, or up 17.90 percent compared to 2017’s realization of $9.33 billion. But, the targets is far away from the initial planned worth of $14.2 billion.

Based on the agency data, in the third quarter (3Q) of 2018, the realization of upstream oil and gas investment was $7.9 billion, or 56 percent of this year’s target. Last year the realization of investments at $6.74 billion.

The spokesman Wisnu Prabawa Taher explained, the projection of 2018 oil and gas investment is determined based on the consideration of the latest conditions by referring to the realization of activities and the estimated additional activities in the 4Q of this year.

In addition, the agency also reporded the realization of replacement of oil and gas reserves or reserve replacement ratio has reached 82 percent of the target of 100 percent. Then, the realization of the cost recovery in 3Q reached $8.7 billion or 87 percent of this year’s target of $10.1 billion.

Its also reported the state revenues from the upstream oil and gas sector during January-September 2018 worth of $11.8 billion or 99 percent of the 2018 State budget’s target of $11.9 billion. By the end of this year, the State revenue from upstream oil and gas is estimated to reach $16.1 billion or 135 percent of the target.

Meanwhile, the realization of oil and gas lifting was 1.92 million barrels of oil equivalent per day (mboepd) or 96 percent of the 2018 state budget target of 2.00 mboepd.

The realization of petroleum lifting in the third quarter of 2018 was 774,000 barrels per day (bpd) or 97 percent of the target of 800,000 bpd. Realization of natural gas lifting 1.15 million boepd) or 95 percent of the target of 1.20 mboepd. The lifting target had not been achieved due to production constraints experienced by several contractors.

The spokesman said, “The achievement is around 96 percent, there are still some obstacles in production, especially among others at PHE ONWJ there are technical constraints on production equipment and are being handled.”

Other obstacles were also experienced in the Rokan Block because there were still effects of technical problems in pipeline leaks in the production facilities. However, these obstacles have been addressed.

Production constraints were also experienced by PT Medco E & P Natuna whose drilling results had not met expectations and needed to reschedule drilling. PT Pertamina EP also has drilling results below expectations and PT Pertamina Hulu Mahakam has a drilling delay related to the selection of drilling tools.

The agency projects the realization of oil and gas lifting by the end of 2018 to be 95 percent of the target.

Investment in the oil and gas sector in Indonesia during the first half of this year reached $4.8 billion or decline compared to the same period last year of $5.6 billion, according to the ministry of energy and mineral resource (MEMR) data.

The decline is in line with the declining trend in energy sector investment globally since 2014 with an average decline of 17 percent amid the low global crude prices. Data from International Energy Agency (IEA) shows investment in the energy sector globally by the end of 2016 reached $1.7 trillion, down 12 percent while investment in the oil and gas sector also fell at 26 percent.

Vice Minister of MEMR Arcandra Tahar denies that the government moves to introduce the gross split scheme to replace cost recovery scheme become one of the main reasons the investment decline in upstream oil and gas sector that contribute around 70-80 percent of total investment in oil and gas.

“Last year, we offered working areas for oil and gas which is there is no interest from contractors. Moreover, we just implement the gross split scheme in the beginning of this year,” he said.

Tahar insisted that the gross split scheme leads to more efficient operations in oil and gas exploration and production. He also convinced the new scheme will attract contractors to invest in upstream oil and gas.

The ministry claimed that contractor reacts positively to a gross split scheme. From 10 working areas that auctioned by the government with a gross split scheme, the contractors have accessed 9 working areas of oil and gas document.

He estimated the investment in oil and gas sector in this year will be around $12-13 billion or far from the initial target of $22.22 billion. Last year, investment in oil and gas sector reached US$12,7 billion.

In the second half of 2017, investment in oil and gas will come from Chevron on Indonesia Deepwater Development and Eni Muara Bakau Ltd on Jangkrik field. Both will start producing oil this year of 110,000 barrel per day and 450,000 barrel per day respectively.

Recently, two state-owned companies, PT Pertamina and PT Perusahaan Listrik Negara has signed the agreement on gas price related to Jambaran Tiung Baru that producing oil of 330,000 barrel per day. Pertamina EP Cepu invested to Jambaran Tiung Baru field around $2.05 billion.

The government also expected that deregulation will spur investment in oil and gas. Aside from introducing gross split regulation, the government has issued the presidential decree  Number 27 Year 2017 to give legal certainty in upstream oil and gas sector.

The MEMR also give authority to Indonesia Investment Coordinating Board related to upstream oil and gas licensing, that cut licensing time to become 10-15 days. The amount of licensing also cut from 106 to 6 licenses. The regulations are expected to have the impact in long term amid the sluggishness in oil and gas industry.

In the terms of oil lifting, the average of oil production until July 2017 reached 802,000 barrel per day or slightly below target 815,000 barrel per day at the end of 2017. The government convinced that oil lifting target

Email: linda.silaen@theinsiderstories.com

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