Indonesia plans to overhaul its energy policy to attract investment of as much as $200 billion over the next decade as the former OPEC member seeks to reverse a decline in its crude oil production.
The amendments to the energy policy, once approved by President Joko Widodo, will allow explorers various financial incentives including tax-free import of drilling equipment and technology and easier cost-recovery, Energy and Mineral Resources Minister Ignasius Jonan said in an interview in Jakarta on April 22. The nation is offering 14 unexplored oil and gas blocks, mostly offshore fields, to investors and expect both foreign and domestic companies to actively participate, he said.
Southeast Asia’s biggest economy is seeking to lift production of oil and gas as a supply deficit widens, deepening the nation’s reliance on imports. Indonesia suspended its membership of the Organization of Petroleum Exporting Countries in November after just one year of rejoining the group as it struggled to stem a decline in crude and gas production caused by aging fields and a lack of investment in exploration for years.
While the development of a much-delayed Masela gas project may cost as much as $16 billion, the East Natuna block with an estimated reserves of 48 trillion cubic feet of gas may require investment of $30 billion to $40 billion, Jonan said. More than a dozen oil, gas and coal-bed methane fields being offered for development next month may need explorers to pump in $20 billion to $30 billion, he said.
PT Pertamina, the state-owned oil behemoth, is spending billions of dollars to boost output at its oil and gas fields and expanding refining capacities in partnership with Russia’s Rosneft OAO and Saudi Arabian Oil Co. Indonesia’s crude output is seen topping 1 million barrels per day by 2019 from about 800,000 barrels now through a revamp of explorations of existing fields and the so-called enhanced oil recovery program, Jonan said.
“When people talk about oil and gas, from a business perspective, people tend to focus on upstream, production, exploration and so on, but for the government it’s all of these,” Jonan said. “If we focus on the upstream, the question is how many reserves, how many oil and gas fields that have not been explored, that’s the issue.”
Indonesia may need to import half of its annual fuel needs even after increasing its refining capacity by 500,000 barrels a day in the next seven years, according to BMI Research. The nation’s processing capacity may grow 2 percent by 2025 while consumption surges 31 percent in the same period, according to BMI.
“For the next ten years we will continue to import,” Jonan said. “The president has said if we continue the import, it should be more of crude oil and not fuel. That’s why the president keeps pushing Pertamina to build refinery locally.”
Indonesia currently produces about 800,000 barrels of crude oil a day and imports about 500,000 barrels of crude and about 800,000 barrels of refined products, Jonan said.