POLISHING UPSTREAM
OIL AND GAS INDUSTRY
The Covid-19 pandemic and
the turmoil in the global
economy have apparently
not stopped the vibrancy of
Indonesia's upstream oil
and gas industry. One of
the proofs is non-tax state
revenue or PNBP over the
past year which reached
US$18.19 billion or 183% of
the target of US$9.95
billion. This year, deposits
from the upstream oil and
gas sector are expected to
reach US$15.88 billion.
Nevertheless, a number of
people warned that the
Special Task Force for
Upstream Oil and Gas
Business Activities (SKK
Migas) should prepare
anticipations as the
transition from fossil energy
to new renewable energy
(EBT) becomes more
massive. Moreover, the
contribution of the upstream
oil and gas sector to state
revenue is still considered
important. The institution is
also expected to continue to
oversee the progress of the
Cooperation Contract
Contractors (KKKS),
because so far the
realization of investments
made by business actors
has often been lower than
the commitments made.
This error can be seen from
the realization of upstream
oil and gas investment that
did not meet the target.
Throughout 2022, actual
upstream oil and gas
investment is only US$12.3
billion, lower than the target
of US$13.2 billion.
Nevertheless, in fact there
are still positive things to be
achieved because this
achievement is the highest
in the last 7 years. SKK
Migas has set a target for
this year's upstream oil and
gas investment to reach
US$15.5 billion. Head of
SKK Migas Dwi Soetjipto
said the target for upstream
oil and gas investment
realization this year would
increase by around 26%,
above the average
investment commitment in
the sector at the global level
of 6.5%. According to him,
the relatively progressive
investment target comes
from a collection of work
plans from PSC Contractors
that are optimistic this year.
Through the approval of the
2023 work program &
budget (WP&B), the PSC
Contractor is committed to
carry out more massive
drilling, reaching 991 wells
this year. This commitment
is much higher than the
plan that was decided in
2022 which is in the range
of 790 wells. He explained
that the high investment
commitment showed that
PSC Contractors' interest in
developing and seeking
other alternative wells
domestically was still quite
enthusiastic. On the other
hand, Dwi added, the
government is committed to
offering profit sharing, as
well as attractive fiscal and
non-fiscal incentives to
maintain the realization of
this investment
commitment. "Investment
for exploration has now
increased from US$0.8
billion to US$1.79 billion,
development has also
increased from US$.2.7
billion to US$.3.37 billion.
That's what we see," he
said, Wednesday (18/1).
Exploration is indeed an
activity that gets the
spotlight in this year's
investment target, because
it leads to the addition of
national oil and gas
reserves and lifting.
Moreover, exploration
activities had dropped at the
start of the pandemic.
Deputy Exploration for
Development and
Management of the SKK
Migas Working Area Benny
Lubiantara said that
exploration activities are
now continuing to increase
after being stuck in 2020
due to the impact of the
Covid-19 pandemic.
Optimism in investment
realization also has
implications for increasing
Development of Mining &
Quarrying Credit (trillion IDR)
the oil and gas lifting target
which is set at 660,000
barrels per day for oil, and
6,160 MMSCFD for natural
gas. All of which were
higher than last year's
achievements. (See
infographic)
PT Pertamina Hulu Energi
is also ready to support the
achievement of the
aggressive targets set by
SKK Migas this year.
Pertamina Hulu Energi
Corporate Secretary Arya
Dwi Paramita said, his party
had prepared a more
massive strategy, including
increasing the number of
development wells drilled,
workovers, and other
production optimization
efforts.
COMMITMENT
REALIZATION
Meanwhile, Chairman of the
Investment Committee of
the Association of National
Oil and Gas Companies
(Aspermigas) Moshe Rizal
asked SKK Migas to
continue to oversee the
realization of the
commitments that have
been given by KKKS. This
is because the realization of
investments made by
business actors is often
lower than the commitments
previously stated. “KKKS
can make a commitment,
but the most important thing
is its realization. That's what
we've been waiting for," he
said. According to him, the
government still needs to
intervene to ensure the
realization of upstream oil
and gas investment is on
target. This is because oil
and gas companies
operating in Indonesia are
often constrained by various
problems in the field when
carrying out their activities.
For example, licensing
issues often hinder
investment activities from
KKKS. For this reason, SKK
Migas must provide
assistance so that permit
issues can be resolved
quickly. Even so, he
acknowledged that the
country's upstream oil and
gas investment climate this
year was better than before.
However, SKK Migas also
needs to pay close attention
to exploration activities
which are lagging behind
compared to production
activities. Komaidi
Notonegoro, Executive
Director of the ReforMiner
Institute, said that SKK
Migas must be more open
with PSC Contractors to
find out about problems that
occur in the field. Moreover,
a number of unplanned
shutdowns that occurred
last year caused oil and gas
production to drop quite a
bit. In addition, he also
highlighted the issue of the
energy transition which
makes upstream oil and gas
investment commitments on
a global scale only reach
6.5%. Currently there are
already several
multinational oil and gas
companies that have
diverted their fossil energy
portfolios to develop more
massive EBT. Separately,
ESDM Minister Arifin Tasrif
also said that the push for
the energy transition had
forced the financial sector to
stop funding new oil and
gas projects. “[The financial
sector] is giving more
funding to renewable
development. This causes a
lack of investment in oil and
gas exploitation," he said at
the time. Nevertheless,
Arifin remains optimistic that
demand for oil and gas will
still grow, especially in
developing regions such as
India, Africa and Asia which
still need energy at
affordable prices.