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Oil companies upbeat on production despite govt's bearish outlook
The Indonesian Petroleum Association (IPA) sees the move from the cost-recovery scheme to the gross-split scheme in production sharing contracts as a turning point in Indonesia's oil and gas industry.
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An operator poses for a photograph at the offshore facility of the Southeast Sumatra (SES) Oil and Gas Block. (Courtesy of/Pertamina)
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“We see this as a push to prove that we need more oil and gas exploration. We have around 128 basins in Indonesia, according to experts, more than half of which are unexplored,” said IPA executive director Marjolijn “Meity” Wajong at a media gathering in Jakarta on Aug. 20.
She said the association’s optimism was propped up by the rising number of successful auctions for oil and gas blocks in Indonesia over the past two years, which suggested that investor interest in the country was “beginning to be palpable.”
Indonesia sold five oil and gas blocks in 2017 and nine the following year. None of the oil and gas blocks auctioned in 2015 and 2016 were sold when crude oil prices slumped to record lows, according to Energy and Mineral Resources Ministry data.
The turning point came when the ministry issued a regulation in 2017 introducing a gross-split scheme in oil production sharing contracts. The scheme made it easier for companies to calculate their earnings than the preceding cost-recovery scheme, thus motivating them to invest in the country.
“We had declining investment and production, but we’re convinced that’s going to turn around. And that’s going to take collaboration and cooperation between all parties and the government to ensure that we have an environment that continues to be attractive for investment,” said IPA acting president Bij Agarwal.
However, in stark contrast to the IPA’s optimism over recent auctions, nationwide oil production declined from 794,000 barrels per day (bpd) in 2014 to 752,000 bpd as of this year’s first half, according to ministry data.
