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Indonesia to vastly up oil and gas exploration amid high prices
The upstream oil and gas regulatory body has expanded the country's exploration and targets for this year to banking on higher firms' revenue driven by last year’s price surge for crude.
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he government is targeting a massive increase in oil and gas exploration this year to boost the country’s production and supply, banking on the much improved financial positions of the sector’s firms, driven by last year’s surge in crude oil prices.
The estimated target for exploratory drilling has been increased to 57 wells, almost double the 30 exploratory wells drilled last year and marking steady expansion over the past five years, according to data from the Upstream Oil and Gas Regulatory Task Force (SKK Migas).
Meanwhile, exploratory investment is projected to rise to US$1.7 billion in 2023, more than double the $800,000 in realized investments last year.
Moshe Rizal, who heads the investment committee of the Association of Oil and Gas Companies (Aspermigas), said last year’s high crude prices, among other factors, had prompted oil and gas firms to expand exploration this year.
The 2022 spot prices for international benchmark Brent crude and North American benchmark West Texas Intermediate (WTI) respectively averaged $100 and $95 per barrel, data from the US Energy Information Administration (EIA) show.
According to SKK Migas data, Indonesia’s oil and gas industry raked in gross revenue of $39.1 billion in 2022, a more than 31 percent increase from 2021.
“The oil and gas exploration trend is expected to increase worldwide. But Indonesia needs to remember [that] we are competing with other countries that are also looking for investors, so the competition will get tougher,” Moshe told The Jakarta Post on Tuesday.
Read also: Indonesia again misses oil, gas production targets: SKK Migas
The government aims to push upstream oil production to 1 million barrels of oil per day (bopd) and gas production to 12,300 million standard cubic feet per day (mmscfd) by 2030 to achieve the energy independence it needs to massively reduce its reliance on costly oil and gas imports.
Read also: RI urgently needs to boost oil, gas investment amid ambitious 2030 targets
SKK Migas data show that this effort has met with many challenges because of the country’s aging wells and lack of new reserves, while recent discoveries have only helped flatten the declining production trend.
Meanwhile, oil and gas lifting respectively reached 660,000 bopd and 5,501 mmscfd last year, with this year’s targets aiming to maintain the same level of oil lifting and a slight increase to 6,160 mmscfd for gas lifting.
Benny Lubiantara, the SKK Migas deputy for exploration, development and work area management, said that five of the 30 wells drilled last year were now dry, and that expanding exploratory drilling was necessary to meet this year’s production targets.
“We hope there will be significant progress this year so we can achieve the 57 [exploratory] wells target,” he told a press conference in Jakarta on Jan. 18.
Putra Adhiguna, energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), said Indonesia would need continuous exploration, as developing the existing fields would eventually hit a wall as production declined over time as they aged.
Replacing ageing wells would remain important, he added, noting that demand growth was likely to continue outpacing production unless the demand curve of oil changed, regardless of the government moving toward electric vehicle adoption and production.
“The widening supply-demand gap for oil leaves no choice but to increase the exploration targets,” Putra told the Post on Tuesday.
Though some energy companies were hunting for undiscovered oil and gas deposits to take advantage of the price surge, he said, a separate trend could show that firms were also becoming more selective in their investments.
Analysts at the Westwood Global Energy Group wrote in a Jan. 12 report, they expected global oil explorers to take a measured view while holding their budgets and activities steady as they tried to improve overall exploration efficiency amid this year’s high and volatile oil and gas prices.
The analysts also expected high-impact drilling, conducted at wells containing large volumes of oil and gas, to hover between 75 and 85 wells this year. This was a slight increase from the 81 high-impact wells completed worldwide last year, with regions like the Asia-Pacific likely see a decline this year.
“Higher oil prices in 2022 have not fed through into more exploration,” the report said.
