JAKARTA (TheInsiderStories) – Deputy minister of energy and mineral resources (MEMR) Arcandra Tahar witnessed the signing of the gross split production sharing contract of the Selat Panjang and West Ganal working area between PT Sumatra Global Energi, Zamatra Bakau Straits Ltd., and Special Oil and Gas Working Unit (SKKMigas), today (10/14).
The Selat Panjang and West Ganal auction is held in phase I of 2019 for the period of February – April 2019 and the winner has been announced on May 6, 2019. The working areas is located in Riau with a contract duration of 20 years.
Total investment commitment for exploration and certain work commitments of the two blocks worth of US$74 million with a signature bonus of $5 million. With the signing, in total there are five oil and gas working areas signed in 2019 with the gross split scheme.
Currently, the ministry in process the regular auction of Phase III by offered four working areas namely East Gebang, Belayan I, West Tanjung I and Cendrawasih VIII until the deadline on Oct. 25.
Previously, Head of SKKMigas Dwi Sutjipto admitted took 10 years time and funds of $6 billion to pursue oil production of 1 million barrels oil per day (MBOPD). In the first semester (1H) of this year, the realization of upstream oil and gas investment recorded $5.21 billion, or 35 percent of this year target of $14.79 billion.
He asserted, although the investment achievements in the 1H of 2019 are still far from the target, the realization of upstream oil and gas investment increased 16 percent compared to the same period the previous year worth of $4.5 billion.
Based on the agency data, there will be 42 main developments up to 2027 with a total investment of $43.3 billion. The projects are divided into 23 offshore projects and 19 onshore projects. Later, the projects are expected to contribute to oil production of 92,100 BOPD and 6.1 billion MSCFD.
Regarding the monitoring of the main upstream oil and gas work program as of 1H 2019, there were 18 exploration wells drilling from a year ago 11 drilling and there were 135 wells compared to 1H of 2018 with 129 wells. In addition, there were 340 wells per June 2019 or an increase from 324 activities per June 2018.
Last year, Moody’s Investors Service says that Indonesia will require oil and gas investments of more than $150 billion from now through 2025 to arrest falling upstream production, develop its gas import infrastructure, and expand its refining capacity to meet its growing level of petroleum demand.
“We also believe that an increasing proportion of investments will likely fall to Pertamina (Baa2 stable) — the state-owned oil and gas producer — and domestic producers as foreign investments moderate amid an evolving regulatory environment,” says Rachel Chua, a Moody’s Assistant Vice President and Analyst.
She continued, “Around 80 percent or $120 billion of the investments will need to be spent on upstream exploration and production, and the remaining $30 billion on the downstream oil and gas segment. Absent a surge in investments, Moody’s expects Indonesia’ total oil and gas production to fall almost 20 percent by 2022 from 2017”.
Declining domestic crude production will be largely countered by the
redirection of export barrels into the domestic market under a new
government directive. Owing to limited domestic refining capacity, petroleum imports will likely account for over 55 percent of petroleum demand by 2022, up from 40 percent now.
Moody’s further sees PT Pertamina’ role — as the government’ designated oil and gas holding company and the executor of its hydrocarbon agenda — as vital for the sector. Accordingly, the government will continue to design its policies such that the fuel subsidy borne by the state-owned company is partly compensated by advantageous upstream policies, including the award of major oil and gas
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