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View all search resultsLocal banks shunning oil and gas exploration projects, SKK Migas says
Ahead of an anticipated bill to amend the 2001 Oil and Gas Law, the upstream regulatory body has urged lawmakers to design a new exploration financing framework.
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The Oyong offshore oil and gas rig in the Sampang Block, located in the Madura Strait off the coast of East Java, burns off excess gas in this undated photo from the Upstream Oil and Gas Regulatory Task Force (SKK Migas). (SKK Migas/SKK Migas)
D
omestic banks are reluctant to fund oil and gas exploration projects, constraining investment in new wells and hampering efforts to lift national production, the Upstream Oil and Gas Regulatory Task Force (SKK Migas) has said.
“No local banks want to finance oil and gas exploration because of the high risks,” SKK Migas head Djoko Siswanto told lawmakers on Wednesday during a meeting with House of Representatives Commission XII, which oversees energy and mineral resources.
He added that annual spending on exploration was currently around US$1 billion.
That figure is far below what is needed to meet the government’s goal of producing 1 million barrels of oil per day (bopd) and 12 billion standard cubic feet of gas per day (bscfd) by 2030.
Read also: Revamped oil, gas regulator to enhance oversight, ex-SKK Migas head says
To get closer to its goal, the government has prioritized projects with higher capex in oil and gas fields with large potential over prospecting numerous small finds for the past few years. It has also offered incentives aimed at encouraging contractors to shift their exploration activity to fields with large potential reserves to increase the likelihood of major discoveries.
Despite these moves, limited budgets, complex licensing and unattractive fiscal terms continued to dampen new exploration activity, Djoko explained.
