Oil and Gas Investment Continues to Decline

Photo by ExxonMobil

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

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 US$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.

Arcandra 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.

Ego Syahrial, Director General of Oil and Gas, 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.

Ego estimated the investment in oil and gas sector in this year will be around US$12-13 billion or far from the initial target of US$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 (IDD) 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, PT Pertamina and PT Perusahaan Listrik Negara (PLN) 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 US$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 (PP) No. 27/2017 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 will be achieved. (MES/RF)

Oil and gas investment (MEMR)