Page 8 - AsianOil Week 02

AsianOil
SOUTHEAST ASIA
AsianOil
2,000 1,800 1,600 1,400 1,200 1,000
800 600 400 200
0
2012 2013
2014 2015 2016 2017 2018
Indonesia's oil deficit
™
Data: BP
Production Consumption
Old vs new
Indonesian Energy Minister Arifin Tasrif said at the start of last month that the government was reviewing whether to allow contractors to choose between the current gross-split licensing model and the previous cost recovery produc- tion-sharing contracts (PSCs).
The energy ministry’s acting director general for oil and gas, Djoko Siswanto, said at the time that developers would be allowed to opt for the older system as long as their proposed costs were “fair” and showed a commitment to increasing production.
Moreover, SKK Migas vice-chairman Fatar Yani Abdurrahman said the government was also looking to streamline the upstream approvals process. To achieve this, Jakarta will make SKK Migas responsible for receiving all exploration approval applications and then liaising with relevant departments to ensure their speedy handling.
The government has been forced to intro- duce reforms owing to a steady decline in both oil and gas production. Crude production in 2019 amounted to 746,000 bpd, down from the 772,000 produced in 2018 and also short of the government’s target of 775,000 bpd. Natural gas production, meanwhile, slipped to 5.93bn cubic feet (167.94mn cubic metres) per day in 2019, down from 7.76 bcf (219.76 mcm) per day in 2018 and also short of the government’s 2019 target of 7 bcf (198.24 mcm) per day.
The promise of a more flexible licensing sys- tem and reduced red-tape seems to have won some limited investor interest, with Abdurrah- man saying at the time that the UAE’s Mubadala Petroleum had expressed its “love” for both con- tract models.
But while Mubadala Petroleum may have expressed its interest, the Middle Eastern coun- try’s latest major investment commitment to Indonesia was not in the upstream but rather in its downstream.
What next
Indonesia and the UAE have signed 11 business deals with worth $23bn combined across sectors including energy and infrastructure, Indonesian President Joko Widodo said on January 13. The agreements including three deals Abu Dhabi National Oil Co. (ADNOC) signed with Pertam- ina and Chandra Asri Petrochemical.
ADNOC agreed with Pertamina to study a potential refinery development in West Java. It also agreed to sell the state company 528,000 tonnes of liquefied petroleum gas (LPG) by the end of the year. ADNOC also agreed to explore the possibility of supplying naphtha to Chandra Asri’s petrochemical complex.
While the deals are good news for the coun- try’s downstream, investment in which has struggled to live up to Jakarta’s grand ambitions over the years, they highlight the continued lack of traction within the upstream.
Companies have very little interest in Indone- sia’s potential oil and gas wealth, given a history of bureaucratic and political hurdles the gov- ernment seems to have just woken up to. SKK Migas has placed its hopes in Cepu and Rokan, with talk that the latter could even reach a second production peak of 400,000 bpd through the use of enhanced oil recovery (EOR). But even the agency seems uncertain about Rokan’s potential, issuing production warnings.
Compounding the problem is the fact that there have been no new discoveries in the vein of Cepu and Rokan. The country is also missing a major wave of new exploration investment to deliver these much- needed new finds, development of which would still take years before first oil and gas is delivered.
The uptick in upstream investment this year will lean more towards operational expenditure and maintaining production lev- els at existing assets. Jakarta still has not done enough to sell its unexplored regions and, until it does so, further declines in oil and gas production seem inevitable.™
Companies have very little interest in Indonesia’s potential oil and gas wealth, given a history of bureaucratic and political hurdles the government seems to have only just woken up to
P8
w w w. N E W S B A S E . c o m Week 02
15•January•2020
,000 bpd