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Oil sector remains sluggish this year
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A worker checks gas pipeline of Onshore Receiving Facilities (ORF) owned by state-owned company PT Pertamina Gas in Porong, Sidoarjo, East Java. The government expects to see lower flaring activities with the issuance of a new regulation. (Antara/Zabur Karuru)
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nvestment in the oil and gas sector has remained sluggish this year and the trend is likely to continue over the next few years, despite recent signs of recovery in global oil prices.
Investment in the highly risky oil and gas sector is hampered not only by a lack of fiscal incentives but also by regulatory uncertainties.
The sluggish condition can be seen in the delays in many oil and gas projects and in the absence of major bidders in government auctions for new oil blocks.
“The reality in Indonesia today is that exploration activity has stalled and hardly any new blocks have been picked up by investors in recent times,” said Marjolijn Wajong, the executive director of the Indonesian Petroleum Association (IPA), as reported in a special report on energy on pages 15, 16 and 17 in today’s The Jakarta Post.
According to Marjolijn, the impact is far worse down the supply chain, with service companies and local contractors seeing no work in sight. The domestic oil and gas industry requires further substantial fiscal and regulatory reform to be able to compete for the investment that is critically needed to increase exploration activities and reverse production declines.
George Barber, an experienced hydrographic surveyor and president director of PT Terra Explorasi and Exploitasi Teknologi Indonesia (TERTINDO), is among the experts who share their insight in the special report, which is published to coincide with the 41st IPA Convention and Exhibition being held in Jakarta from May 17 to 19.
In his opinion piece, Barber says a lack of investor interest is also due to the fact that the quality and depth of data offered to investors are generally poor. Besides improving the quality of the data, Indonesia also needs to further improve legal, regulatory and fiscal frameworks in order to lure more investors.
