Tweet
Written by Audrey Raj
Indonesia has managed to increase oil production this year, a first for the country since 2008, mainly due to output
from the Banyu Urip Field within the Cepu Block in East Java.Following years of a declining trend, daily crude
production increased by 6.2% from 786,000 bbl/d in 2015 to 834,000 bbl/d in July 2016, the country’s upstream
regulator SKK Migas reported. The increase in production mainly comes from Banyu Urip Field, which has been in a full
scale production, said Amien Sunaryadi, chairman of SKK Migas. He said other projects, such as the ones by the
Cooperation Contract Contractors also exceeded production targets that were set out in the 2016 work program and
budget.“The upstream oil and gas industry in the past two years has been facing severe challenges as a result of the
decline in world oil prices. Nevertheless, the industry still managed to make some significant achievements,” Sunaryadi
said.Indonesia which re-gained its status as the only Asian member of the Organization of the Petroleum Exporting
Countries (OPEC) in December 2015, has historically seen a decline in oil production due to aging fields and limited
investment. As domestic demand was exceeding production, the country become a net importer of petroleum by 2004,
despite being resource-rich. Currently, Indonesia is in a transitional phase and is beginning to slowly attract the
interest of international investors.Since the start of the year the government has approved 21 field developments plans
to-date. The 18 projects approved from January-April 2016 alone amounts to about US$1.496 billion in investment,
and cumulative production of 45 MMbbl of oil and condensate and 271 Bcf of natural gas. Investment levels in the
industry increased by 15% from $19.3 billion in 2014 to $22.2 billion in 2015 and are forecast to increase to $23.9
billion in 2016, a research by PwC showed. The report, 7th edition of the PwC Indonesia Oil and Gas in Indonesia -
Investment and Taxation Guide, indicated that in 2014 there were seven new oil and gas contracts signed, with a
further 12 contracts in 2015.According to PwC, the Indonesian government is attempting to incentivize investment and
has also improved production sharing splits in recent bid rounds with targeted “after-tax” returns for oil increased from
15%-25% and for gas from 30%-35% to 40%.In May 2016, as a result of weaker response from its 2015 oil and gas
bidding round, the Indonesian Ministry of Energy and Mineral Resources said it will review incentives to increase the
exploration of new reserves in the country.This includes extension of exploration period from 6-10 years, and
ministerial regulation to open oil and gas data to investors. Currently, companies keen to view oil and gas data in
Indonesia have to submit an application to the government, plus pay a fair some of administration cost.
The country is also in the midst of expanding its maritime sector through the implementation of a new shipbuilding
policy for floating production storage and offloading (FPSO) vessels, in an attempt to boost domestic shipbuilding.
This will see FPSOs needed for exploration and production activities in Indonesia be constructed and converted locally,
as opposed to outsourcing projects to shipbuilders abroad. Indonesia has more than 100 shipyards, which produce an
average of about 100 ships for different purposes each year.
Indonesia has managed to increase oil production this year, a first for the country since 2008, mainly due to output
from the Banyu Urip Field within the Cepu Block in East Java.Following years of a declining trend, daily crude
production increased by 6.2% from 786,000 bbl/d in 2015 to 834,000 bbl/d in July 2016, the country’s upstream
regulator SKK Migas reported. The increase in production mainly comes from Banyu Urip Field, which has been in a full
scale production, said Amien Sunaryadi, chairman of SKK Migas. He said other projects, such as the ones by the
Cooperation Contract Contractors also exceeded production targets that were set out in the 2016 work program and
budget.“The upstream oil and gas industry in the past two years has been facing severe challenges as a result of the
decline in world oil prices. Nevertheless, the industry still managed to make some significant achievements,” Sunaryadi
said.Indonesia which re-gained its status as the only Asian member of the Organization of the Petroleum Exporting
Countries (OPEC) in December 2015, has historically seen a decline in oil production due to aging fields and limited
investment. As domestic demand was exceeding production, the country become a net importer of petroleum by 2004,
despite being resource-rich. Currently, Indonesia is in a transitional phase and is beginning to slowly attract the
interest of international investors.Since the start of the year the government has approved 21 field developments plans
to-date. The 18 projects approved from January-April 2016 alone amounts to about US$1.496 billion in investment,
and cumulative production of 45 MMbbl of oil and condensate and 271 Bcf of natural gas. Investment levels in the
industry increased by 15% from $19.3 billion in 2014 to $22.2 billion in 2015 and are forecast to increase to $23.9
billion in 2016, a research by PwC showed. The report, 7th edition of the PwC Indonesia Oil and Gas in Indonesia -
Investment and Taxation Guide, indicated that in 2014 there were seven new oil and gas contracts signed, with a
further 12 contracts in 2015.According to PwC, the Indonesian government is attempting to incentivize investment and
has also improved production sharing splits in recent bid rounds with targeted “after-tax” returns for oil increased from
15%-25% and for gas from 30%-35% to 40%.In May 2016, as a result of weaker response from its 2015 oil and gas
bidding round, the Indonesian Ministry of Energy and Mineral Resources said it will review incentives to increase the
exploration of new reserves in the country.This includes extension of exploration period from 6-10 years, and
ministerial regulation to open oil and gas data to investors. Currently, companies keen to view oil and gas data in
Indonesia have to submit an application to the government, plus pay a fair some of administration cost.
The country is also in the midst of expanding its maritime sector through the implementation of a new shipbuilding
policy for floating production storage and offloading (FPSO) vessels, in an attempt to boost domestic shipbuilding.
This will see FPSOs needed for exploration and production activities in Indonesia be constructed and converted locally,
as opposed to outsourcing projects to shipbuilders abroad. Indonesia has more than 100 shipyards, which produce an
average of about 100 ships for different purposes each year.