High global prices discourage investors in Indonesia’s upstream oil and gas industry

Jakarta – The momentum of high world oil and gas prices does not directly have a positive impact on the interest of investors and Cooperation Contract Contractors (KKKS) to invest their capital in the upstream oil and gas industry in the country. This can be seen from the relatively small investment in upstream oil and gas activities.

Head of SKK Migas, Dwi Soetjipto said in a written release, Tuesday (12/7), the investment achievement in the first semester of this year only reached USD 4.8 billion or IDR 72 trillion assuming an exchange rate of IDR 15,000 per dollar. This achievement is also lower than the same period last year of USD 4.92 billion.

“This achievement is relatively small amid the momentum of high world crude oil and gas prices,” he said.

Meanwhile, the price of Brent crude oil on Tuesday maintained at USD 105.40 per barrel, while West Texas Intermediate (WTI) crude oil was at USD 102.21 per barrel.

The price spike also occurred in global gas, where the price rose above USD 25 per million metric British thermal units (mmBtu). With the current spot price of Liquefied Natural Gas (LNG) in the range of USD 43 per mmBtu or equivalent to USD 240 per barrel of oil equivalent. Soetjipto said he hoped that the recovery period from the pandemic in the second half of this year will improve investment and production performance in national upstream oil and gas activities.

Furthermore, according to him, although the investment score is relatively small, SKK Migas recorded state revenues of USD 9.7 billion or IDR 144.5 trillion (at an exchange rate of IDR 14,900/USD), from the upstream oil and gas industry during the period January-June 2022. SKK Migas also recorded a reserve replacement ratio (RRR) of 77%, with a cost recovery of USD 3.2 billion or IDR 47.6 trillion. Meanwhile, at the 2nd CEO Forum meeting on Monday, SKK Migas together with CEOs of KKKS agreed to implement five recommendations in order to improve national upstream oil and gas performance in a short period of time up to 2030.

The five recommendations are to increase oil and gas production in the short term of three months, costs and benefits, increase production in the filling-the-gap program, deepen the enhanced oil recovery (EOR) mechanism and prepare 2023 Work Program and Budget.

“The existing recommendations reflect the real needs of the upstream oil and gas industry, and we hope that stakeholders will provide their support to realize these recommendations,” said Soetjipto. (Hartatik)

Banner photo: PT Pertamina Hulu Energi (PHE), as Pertamina’s Subholding Upstream, through PT Pertamina Hulu Energi Offshore North West Java (PHE ONW) managed to find oil and gas reserves from drilling the GQX-1 exploration well in North Java waters. (Source: Pertamina)

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