Indonesia is attracting strong interest from foreign companies following government efforts to improve tax conditions for production sharing contracts (PSCs).
This is what analysts at BMI, a Fitch Solutions company, noted in a report recently sent to Rigzone, adding that international and regional companies, such as Eni, ExxonMobil and Petronas, “are strengthening their commitments to invest in the Indonesia’s upstream sector as the government continues to improve PSC terms to attract investment”.
“The government in 2020 revoked a rule that had made the use of a gross distribution scheme mandatory for new or renewed PSCs and introduced a new rule that allowed flexibility for investors to choose PSCs based on the gross division or cost recovery,” analysts said in the publication. report
“As a result, Indonesia has successfully secured a number of PSC contracts with international companies for exploration and production blocks offered in the 2021 and 2022 bidding rounds,” they added.
Analysts noted in the report that in February this year, the Indonesian government awarded exploration contracts for three blocks, including Peri Mahakam, Sangkar and Bunga.
“The Bunga block was awarded to a consortium of South Korea’s PT Pertamina Hulu Energi and POSCO International Corporation, while the Peri Mahakam block is awarded to Pertamina Hulu Energi and Eni Indonesia,” the analysts said in the report .
“The Sangkar block was awarded to PT Saka Eksplorisi Timur. Paus offshore work area with an estimated 2.5 trillion cubic feet of gas on offer [the] The 2022 tender round was awarded to Blue Sky Paus Ltd,” they added.
Analysts also noted in the report that BP’s new 30-year PSC contract for the Agung I and Agung II gas exploration blocks offered in the bidding round for the oil and gas working area on 2021 “is an important step to increase the growth potential of Indonesia’s gas production” and Eni said it “reinforced its commitment to make additional investments in the Indonesian upstream gas market after signing an agreement to buy Chevron’s 62% stake in the Bangka and Gendalo-Gehem deepwater gas projects.”
In the report, BMI analysts highlighted that Petronas is increasing investments in the Bukit Tua asset, noting that in March 2022, Petronas won a PSC contract to operate the Ketapang II block located in East Java .
“Petronas subsidiary PC Ketapang II started construction of the Bukit Tua Phase 2B project in Indonesia. The project is expected to produce 30 million standard cubic feet per day of gas,” the analysts said in the report.
In March 2023, Indonesia’s upstream regulator SKK Migas and ExxonMobil signed an agreement to cooperate in exploration activities in Indonesia’s open areas, analysts said in the report.
“Joint exploration activities will focus on Onshore Papua, East Java, Offshore Sumatra and others. The two parties to the agreement reported that they allocated a capital expenditure of IDR 630 billion [$41 million] for explorations,” the analysts added.
Indonesia continued to experience contractions in gas supply in 2022, analysts noted in the report, which they attributed to “a sharp decline in production and gas reserves from maturing gas fields.”
“Gas production ranges from 76 billion cubic meters to 72 billion cubic meters between 2014 and 2018, before declining further to 57 billion cubic meters in 2022,” analysts said in the report
“Upstream exploration investment has declined between 2019 and 2020, but upstream investments have increased since 2020, rising to $12.1 billion in 2022 from $10.8 billion in 2021, according to upstream regulator d ‘Indonesia SKK Migas,’ they added.
“The decline in investment is attributed to a number of reasons ranging from a complex regulatory system to unattractive tax incentives,” the analysts said.
IMC analysts noted in the report that Indonesia’s government is once again making major efforts to reverse declining gas reserves and production by offering more acreage for exploration.
“Indonesia faces the problem of structurally declining natural gas reserves, which have fallen by 50 percent from 100 trillion cubic feet in 2019 to 50 trillion cubic feet in 2021,” they said in the report.
“In an effort to reverse gas reserves and production, the government launched successive rounds of oil licenses offering seven areas for exploration and exploitation in 2021 and 2022,” they added.
“The majority of blocks are located in mature basins such as South Sumatra, East Java and Kutei, indicating that investors are still looking at these areas as lower risk exploration opportunities and quick monetization,” they continued.
“However, the Indonesian government is expected to offer more blocks in frontier basins and deepwater areas to attract investment in upstream gas exploration and production because the exploitation of prospective areas and unexplored reserves will be key to the country’s ambition to achieve oil and gas production targets of one million barrels per day of oil and 12 billion cubic feet per day of gas by 2030,” they stated .
Analysts said in the report that Indonesia still presents enormous opportunities for the development of stranded gas discoveries.
According to the Energy Institute’s first annual World Energy Statistical Review and 72nd overall, Indonesia produced 57.7 billion cubic meters of natural gas in 2022. This figure marked a 2.7% year-on-year decline and 1.4% of global natural gas production in the last year. year, the review noted.
Indonesia’s natural gas production has declined 3.0 percent year-on-year from 2012 to 2022, the review noted.
The country’s crude and condensate production stood at 612,000 barrels per day in 2022, according to the review, which noted that this figure marked a 7.1% year-on-year decline and 0.8% of the global total in 2022. From 2012 to 2022, crude Oil and condensate production in Indonesia fell 3.3 percent year-on-year, according to the review.
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