Licensing problems hamper oil exploration
Despite the country’s depleting oil reserves, upstream oil and gas regulator BPMigas has revealed that investments in explorations were still very small and far below the expectation.
BPMigas spokesperson Gde Pradnyana said on Friday that most of the investments planned by oil and gas contractors went to production activities and even if some companies had allocated a bigger budget for exploration, the realization was usually only half of the budget.
The disbursement of the exploration budget was not optimum since activities often encountered non-technical barriers such as the difficulty in obtaining permits from regional administrations, overlapping lands and rejections from locals, he reported.
“At the Madura block [in East Java] for example, drilling activities were rejected by local residents,” he said at a discussion during the 36th Indonesian Petroleum Association (IPA) Convention and Exhibition in Jakarta.
According to BPMigas’s data, Indonesia’s oil reserves have long been in decline. As of Jan. 1, last year, reserves stood at 4.03 billion barrels of oil and 104.7 trillion standard cubic feet of gas. As of Jan. 1, 2012, reserves dropped to 3.92 billion barrels of oil and 104.5 trillion standard cubic feet of gas.
Discoveries were only 215.5 million barrels of oil and 2.86 trillion standard cubic feet of gas in 2011, while production amounted to 329.9 billion barrels and 3.08 trillion standard cubic feet of gas.
Actually, the government has issued a presidential instruction on national oil production acceleration which mandates that regional administrations cooperate with oil and gas contractors and BPMigas so that both exploration and production projects could be executed on schedule.
The Energy and Mineral Resources Ministry predicts that this year, investments in the oil and gas industry will reach US$18.3 billion, comprising $15.8 billion in the upstream sector and $2.42 billion in downstream. Previously, IPA predicted upstream investments might hit nearly $19 billion in 2012.
Before the closing ceremony of the IPA Convention and Exhibition, the Energy and Mineral Resources Ministry’s director general for oil and gas, Evita Herawati Legowo, announced the result of oil and gas working areas auction for the second round of 2011 and the first round of 2012.
From the regular tender, of nine blocks offered, only one, the Kuningan block, was taken. PT Equator Energy won the tender with a total investment commitment in the first three years of $9.95 million plus a signing bonus of $1 million.
For the direct offer tender, from 14 blocks offered by the government, 13 blocks were taken. The total investments for the 13 blocks reached $233.41 million plus signing bonuses of $15.7 million.
During the closing ceremony, IPA president Elisabeth Proust emphasized the importance of attractive incentives and better infrastructure in place to boost exploration and production activities.
“We need a collaborative approach among stakeholders to deal with the gap between energy supply and demand as well as increase production to meet the target set by the target. Coordination, consultation and cooperation are the key words,” she said.