Page 8 - AsianOil Week 49

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to other institutions and we will talk to relevant departments what needs to be cut,” he said. He added that Tasrif had accepted the initiative, which was expected to reduce the number of permits required from more than 150 to around 10 within a year or two. Moreover, the official expects the streamlining of the approvals process to allow companies eventually to reach the pro- duction phase within just five years of submitting an exploration approval request.
He added that government was working on a policy that would adapt to shifts in the international oil price, noting that if prices soared the govern- ment’s share of production would be revised up, while the reverse would be true if prices fell.
The official noted that any changes the gov- ernment introduced would not be applied to existing contracts. He said “When [companies] sign a PSC, they will stay until the PSC expires. The government will honour it. Long-term plan- ning depends on what you sign in the document. It will stay until you finish.”
Production and investment slump
The government’s move to introduce greater flexibility into its upstream licensing comes as Jakarta looks to stem a decline in production.
National crude output almost halved from a peak of 1.67mn bpd in 1991 to 808,000 bpd in 2018, according to BP’s Statistical Review of World Energy 2019. Gas production, mean- while, fell from a peak of 87bn cubic metres in 2010 to 73.2 bcm in 2018.
Upstream investment in Indonesia almost halved from $22bn in 2014 to just $11.9bn in 2018, according to government data. In the first half of this year, investment stood at $5.21bn.
SKK Migas intends to announce its long- term strategic plan by the end of December, with Abdurrahman noting that doing so would allow the country to lift crude oil production to 1mn bpd by 2030.
“We have identified 12 prospects across the Archipelago. We can go offshore, we can go
deep oil. This data is open to oil companies, you can come [to SKK Migas] and take a look free of charge. In other countries you have to pay,” Abdurrahman said.
What next
Despite embracing resource nationalism in the run-up to this year’s national elections, Indo- nesian President Joko Widodo appears to have listened to the business community’s concerns.
The first sign of this softening was the gov- ernment’s decision to allow US super-ma- jor ConocoPhillips and the Spanish Respol to remain partners in the new PSC for the onshore Corridor gas field. Under the terms of the 20-year extension, the US company will remain operator for at least the first three years, at which point control could be gradu- ally transferred to Pertamina. The government has indicated, however, that there is no fixed timeline for this to happen.
Investment has fallen off in Indonesia and so too has production. Unfortunately for the government, band-aid political fixes will not see international oil majors return in force with multi-billion dollar exploration programmes. Upstream spending had been shrinking before the introduction of the gross-split scheme and offering the option to return to the way things were pre-2017 will not change the lack of confi- dence that investors have in the country.
Companies rely on a stable business climate and, despite Jakarta’s promises of providing greater flexibility and honouring existing con- tracts, the fact that the government is prepar- ing to revamp its licensing model again so soon speaks to a fundamental lack of stability.
If the government can deliver on its prom- ises of streamlining the approvals process and expanding the contracting option, then it should provide some encouragement to smaller devel- opers with more appetite for risk. The larger players will likely prefer to wait to farm in to new discoveries if and when they are made.™
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w w w . N E W S B A S E . c o m Week 49 11•December•2019