W

ith a new leader at its head, the Energy and Mineral Resources Ministry has reinstated its commitment to revising the almost two-decades- old Oil and Gas Law in order to salvage Indonesia’s depleted reserves and boost production.

Newly minted Minister Arcandra Tahar, a long-time player in the oil and gas sector, said the law needed to be revised because there were several articles that discouraged oil and gas players from investing in non-conventional exploratory and production activities. During a time when commodity prices are low, such exploration activities are essential.

“The Oil and Gas Law must be able to give us a solution as the days of easy geological conditions and sufficient infrastructure have long gone. Our national production continues to decrease while our return and our low rate of return on investment has shown us that we are not prepared to enter this new era,” he told reporters on Wednesday afternoon.

Low global oil prices have forced companies to curb production and non-conventional exploratory practices, resulting in a continuously decreasing production rate while Indonesia’s national consumption continues to increase annually.

Indonesia’s oil reserves have dropped to 3.6 billion stock tank barrels by the end of 2015 from 3.62 billion the previous year, data from the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) shows.

Meanwhile, national demand reached 1.63 million barrels of oil per day (bopd) at the end of last year. If Indonesia reaches its target production of 820,000 bopd without any new findings, its proven reserves could be depleted in little over a decade.

SKKMigas estimates that there are around 3.7 billion stock tank barrels in potential reserves that could help the oil and gas sector back on its feet if found. However, most of the potential reserves are located in the eastern portion of the country, which investors have been reluctant to touch due to its need for expensive exploratory methods.

Arcandra, who has several international patents in offshore fields, claims that Indonesia must find companies that are willing to invest and bring in new technology that will allow for deepwater exploration, shale oil and gas extraction and enhanced oil recovery (EOR) if it wants any hope of surviving.

“For example, the US was able to double its oil production in only seven years with the help of technology and also the support of businesses and human resources,” he said.

Indonesia has an estimated 46 trillion cubic feet (tcf) and 7.9 billion barrels of risked, technically recoverable shale gas and oil resources, respectively, out of 303 tcf and 234 billion barrels of risked shale gas and oil in-place, according to a 2015 US Energy Information Administration report.

Technically recoverable resources refers to oil and gas that can be produced based on current technology, industry practices and geologic knowledge regardless of current global prices.

Despite Arcandra’s commitment to revising the law, progress at the House of Representatives has been slow and is unlikely to be completed by the end of the year.

However, the Energy and Mineral Resources Ministry’s oil and gas director general has already spent several months composing ministerial regulations that will offer incentives to companies willing to invest in deepwater exploration.

The regulation is expected to be completed by the end of this year and will offer incentives such as the option to create a national-based plan of development and tax-free exploration.

State-owned oil and gas company Pertamina applauded Arcandra’s vision of bringing in new technology for the sake of the oil and gas sector. Pertamina executive director Dwi Soetjipto said the company was planning to launch its own technology center to develop such methods by the end of the year.

“Of course we must have a transfer of technology, especially for deepwater exploration and also to explore potential shale oil and gas. Furthermore, we must implement EOR so that we can still increase production from our own oil wells,” he said.

Meanwhile, ReforMiner Institute researcher Pri Agung Rakhmanto was optimistic that Arcandra’s connections would deliver more foreign investment, especially for the upstream oil and gas sector.

“To find new big fish for our reserves, we need to bring in new technologies, which definitely need more investment,” he told The Jakarta Post.

Arcandra’s former company Petroneering has worked with state-owned oil and gas company Pertamina, British BP and US-based ExxonMobil, according to its website.