JAKARTA (TheInsiderStories)—Indonesia continued to post deficit in its oil and gas trade balance, amid low national production and strong demand for gasoline products at home.
The statistics bureau announced on Monday (16/04) that Indonesia’s oil and gas trade posted a deficit of US$2.70 billion in the first quarter of this year, despite the non-oil and gas trade booked a surplus of US$2.99 billion.
The deficit from oil and gas trade dragged the overall country’s trade balance performance as in overall it only reached a surplus of $282.8 million in the quarter.
The sector that during the president Soeharto era was the biggest contributor of foreign exchange revenue has seen a declining trend over the past few years. Last year the country posted US$8.57 billion in deficit from oil and gas trade, while the non-oil and gas trade recorded surplus of US$20.40 billion.
The decline was attributable to the low oil and gas production from the nation’s producers. In the first quarter of 2018, oil production only reached 750.000 barrel per day (bpd) or only 94 per cent of the target set in the state budget.
Furthermore, the gas production also failed to meet state budget target in the first quarter of 2018. Gas production only reached 1.139 million barrel oil equivalent per day (boepd) or 95 per cent of the target set at 1.200.000 boepd.
This figure was extremely low compared to production in 1960s-1990s when oil and gas contribute significantly to the state revenue. Oil production reached 1.38 million bpd in the period with the peaked production was recorded at 1.65 million bpd in 1977.
At that period of time, Indonesia was one of the 11 largest oil producers in the world and an important member of Organization of Petroleum Exporting Countries (OPEC).
Amid low production trend, the national demand has continued growing to 1.6 million bpd and this has forced the government to import crude oil to secure the national demand. As a consequence, the country’s trade balance from the sectors turned into deficit area.
The low production is likely to continue as low investment in the oil and gas industry. The investment in the first quarter of 2018 only reached US$2.4 billion or only 17 per cent from this year target of US$14.2 billion.
According to the Energy and Mineral Resources Ministry’s (EMR Ministry) data, investment in oil and gas sector stood at $20.72 billion in 2014. It continued to decline to $17.38 billion in 2015, $12.74 billion in 2016, and $10.18 billion in 2017.
Of the total investment made in 2017, only $180 million was put on the exploration activities, while $9.33 billion was intended to maintain production capacity.
The low investment in the exploration is worrying because exploration plays an important role for future production level.
The investment in oil and gas remains low mainly because of the business uncertainties, including the dismissal of the Upstream Oil and Gas Authority, which triggered the government to change it into Special Task Force for Upstream Oil and Gas and positions it under the EMR Ministry as well as the planned amendment of the 2001 Oil and Gas Law, which is still yet to be realized.
Most observers and major industry players blamed the lengthy process of the Revision of the Oil and Gas Law for the low investment as the delayed revision has created uncertainty in the sector.
Oil and gas majors are reluctant to make a major investment in the risky business of explorations. Explorations require huge investments, especially if the exploration is conducted in offshore and deepwater.