Boosting Upstream Oil and Gas Investment Requires Continued Acceleration and Policy Improvements
JAKARTA, 14 May 2024 -The oil and gas industry is set to continue playing a crucial role in the energy transition era. The sustainability of the upstream oil and gas industry is also demanded to reduce emissions generated from production operations. A key factor in the sector's growth is supportive investment policies.
Yuzaini Md. Yusof, President of the Indonesian Petroleum Association (IPA), praised the Indonesian government's efforts to improve regulations. However, he emphasized that businesses urge the government to keep innovating in policy-making, as policies must evolve with global developments and needs.
"Countries like Bangladesh, Vietnam, Thailand, and Malaysia have advanced significantly. Indonesia has made progress in the past five years, but these countries have moved further ahead. I think we should learn from other countries for improvement," Yuzaini stated during Plenary Session 2: "Oil and Gas Industry Transformation to Support Achieving 1 Million BOPD and 12 BCFD Gas by 2030 and Longer Term Decarbonization Target" at IPA Convention and Exhibition (IPA Convex) 2024 at ICE BSD, Tangerang, Tuesday (14/5).
One improvement that can be adopted is related to the management of oil and gas blocks nearing the end of their contracts. He noted that businesses are keen to continue investing but are often hindered by regulatory issues. "Some players want to extend contracts, but sometimes regulations do not support this. Discussions need to be accelerated to amend existing regulations and improve terms and conditions for expiring PSC contracts," he said.
Another crucial aspect is the implementation of CCS/CCUS. Although the government has issued several regulations, more needs to be done to ensure they are promptly implemented through specific operational guidelines.
Carole Gall, President of ExxonMobil Indonesia, mentioned that upstream oil and gas companies face dual tasks: continuing production while reducing emissions. Both must progress simultaneously, which can only be achieved with government support. "At Banyu Urip, we increased production without increasing emissions. Exxon has successfully produced without flare emissions since 2021," Carole revealed.
Kathy Wu, Regional President of BP Gas & Low Energy Asia Pacific, explained that Indonesia still has substantial oil and gas resource potential. BP continues to invest and hopes for government support through regulatory improvements. "Looking ahead, the development of the Tangguh LNG project faces more challenges, including market conditions. These challenges will also be encountered at other sites in Indonesia and require more government collaboration," she said.
Musri, a member of the National Energy Council (DEN), conveyed that the government continues to strive towards achieving the revised energy mix target of 17–19%. The government, through DEN, revised the target for renewable energy in the national energy mix to 17–19% by 2025 from the previous 23% target through updates to the National Energy Policy (KEN). DEN is updating Government Regulation No. 79 of 2014 on National Energy Policy to align with strategic environmental changes, climate change commitments, and the transition to carbon neutrality by 2060. "The draft regulation being designed and will be issued mid-year is the result of coordination with oil and gas experts from IPA and other associations," he said.
Dadan Kusdiana, Acting Director General of Oil and Gas at the Ministry of Energy and Mineral Resources (ESDM), stated that the government has initiated various policies to facilitate exploration and investment in production. "We are also collaborating and negotiating with the Ministry of Finance to make it easier for oil and gas players to invest," Dadan revealed.
Optimism for upstream oil and gas investment remains high. According to government data, oil and gas block contracts have been signed from 2021 to 2024, with the highest number of 13 contracts signed in 2023, a significant increase compared to five contracts in 2022. Policy improvements initiated by the government include contract flexibility, policies for new oil and gas blocks, improvements in oil and gas data access, various upstream oil and gas incentives, and the issuance of CCS/CCUS rules.
Dwi Soetjipto, Head of the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), asserted that government support is crucial for the development of the oil and gas industry. He encouraged contractors to actively discuss investment obstacles with SKK Migas. "Come to SKK Migas to discuss resource monetization. I want the SKK Migas team to play a role in assisting contractors," emphasized Dwi. (*)
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