Facing a New Reality in the Upstream Oil and Gas Sector
Amid increasingly volatile global geopolitical dynamics and an unavoidable surge in energy demand, the upstream oil and gas (migas) sector is no longer operating in a zone where exploration and production are straightforward. The era of "easy energy" is over, replaced by an operating landscape that demands a high degree of complexity and more challenging exploration risk. In this environment, the question is no longer just how much potential lies beneath the earth, but how agile a country and its industry players are in responding to this new reality to hit oil and gas production targets and meet energy needs.
This perspective was affirmed by Abdullah F. Al-Osaimi, Executive Vice President – Finance & Administration at KUFPEC, who spoke at the Global Executive Talk session "The End of Easy Energy: The New Reality of Oil and Gas" at the IPA (Indonesian Petroleum Association) Convention and Exhibition 2026, recently held in Jakarta. According to him, rising geopolitical tension is actually pushing national oil companies to broaden their diversification and expand capital deployment globally. He added that global instability further underscores a clear signal: competition for investment capital is now tighter and more cross-border than ever.
This reality is also changing how investors assess the viability of an oil and gas company. Roberto Lorato, Director & Chief Executive Officer of MedcoEnergi, speaking at the same session, pointed to a significant shift in investor expectations, from an initial singular focus on the transition agenda toward a more balanced view weighing energy security, returns, and environmental, social, and governance (ESG) factors.
These statements underscore that business risk in the upstream oil and gas sector is rising. Yet this new reality also shows that the biggest challenge today is not merely a technical exploration issue but also a matter of institutional governance readiness and the investment climate on offer. As global investors weigh highly competitive investment destinations across other countries, Indonesia too is being pushed to prove it holds significant appeal through structural reform.
On this point, IPA President Kathy Wu, speaking at the same session, affirmed that IPA has identified three key pillars that determine the success of the strategic partnership between government and industry players. "From IPA's perspective, a successful partnership rests on three crucial foundations: first, legal certainty and recognition of contract sanctity; second, the speed of required timelines; and third, exploration aggressiveness."
The following outlines the more profound strategic message for the direction of Indonesia's future energy policy, based on those three pillars:
- Legal Certainty & Contract Sanctity: The upstream oil and gas industry involves long-term investment spanning decades. Investors need assurance that the rules of the game and cooperation contracts agreed upon today will continue to be honored and protected from the various shifts that may arise from short-term policy changes. Regulatory consistency is the primary currency for building market trust.
- Cycle Time & Delivery Pace: Convoluted bureaucracy and slow permitting processes are classic obstacles that erode project economics. Speeding up the cycle time from discovery to commercial production is key if Indonesia is to avoid falling behind in the regional race for energy supply.
- Aggressive Exploration: Without massive, sustained exploration activity, national oil and gas reserves will gradually shrink. Opening new working areas and offering competitive fiscal support for high-risk drilling are essential to finding new giant reserves in the future.
Ultimately, the future of Indonesia's upstream oil and gas sector depends heavily on how well the government and industry players can move in step, translating these three foundations into concrete action. With many oil and gas basins still unexplored, a sign of the country's substantial national potential, Indonesia is considered, geologically, to have sufficient capital to attract global oil and gas investment. But that alone is not enough. As underscored in this discussion, the new era in the energy sector fundamentally requires speed of execution, quality collaboration among stakeholders, and policy alignment to ensure the country's future energy supply remains secure and affordable for all Indonesians. (*)
