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Key reform aims to revive upstream sector

Playing second fiddle to anyone is hard, however, the upstream oil and gas sector seems to be all but neglected now that it is no longer the state’s main money maker.

Fedina S. Sundaryani (The Jakarta Post)

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Jakarta

Fri, May 19, 2017

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A worker riding bicycle passes through an area at Balongan oil refinery facility owned by state-owned energy company PT Pertamina in Indramayu, West Java. (Antara/Rivan Awal Lingga)

Playing second fiddle to anyone is hard, however, the upstream oil and gas sector seems to be all but neglected now that it is no longer the state’s main money maker.

State revenue from the oil and gas sector is no longer what it once was amid low global crude oil prices.

It only contributed Rp 44.9 trillion (US$3.35 billion), around 17 percent, to non-tax state revenue totaling Rp 262.4 trillion, a far cry from the target of Rp 68.7 trillion.

A former member of the Organization of Petroleum Exporting Countries (OPEC), the country faces the painful reality of being a net importer of oil, as its output has consistently been low because of aging oil fields and minor investment in exploration.

Oil and gas imports surged 55.7 percent year-on-year (yoy) to US$88.2 billion from January to April, according to the Central Statistics Agency (BPS).

However, the grim picture may soon change as Indonesia is apparently determined to reverse a drop in its crude oil production.

In its latest plan to overhaul the flagging upstream sector, the government has expressed its desire to follow the footsteps of Mexico, which it considers a role model.