Indonesia is a valuable market for U.S. suppliers of oil and gas equipment, technology, and services. In 2008, the Government of Indonesia (GOI) signed contracts with 41 production sharing contractors (PSC). Annual investment in this industry reached $12.96 billion. It is expected that in 2009, investment will reach $17.706 billion. PSCs will invest $14.880 billion in production, and $2.826 billion in exploration.
Indonesia imported $699 million worth of oil and gas equipment in 2007. In 2009, it is estimated that the total import value of oil and gas equipment will reach $769 million. Imports of US products represented 27 percent of the total import value. Industry sources estimate that the market will increase by 10 percent in 2009, driven by expanding exploration and enhancement of existing oil fields.
Oil and gas remains a major revenue resource for Indonesia, generating an estimated of $26.2 billion in 2008. The country’s production was 988,000 barrels per day (bpd) in output of crude and condensate in 2008, slightly higher than the target of 977,000 bpd. Gas production reached 7.5 billion cubic feet per day (bcfd) in 2008. Most of this production (90%) came from mature fields, which are continuing to decline.
BP Migas reported that contractors drilled 66 exploration wells, fewer than the 2007’s drilling activity of 73 wells. Contractors also conducted 23,364 km 2D and 15,136 km2 3D seismic surveys, an increase over 2007 which counted 9,389 km and 4,835 km2 respectively. According to BP Migas, the decrease of drilling activity was caused by several problems such as land acquisition, licensing difficulties and a worldwide scarcity of oilrigs.
As of January 2008, Indonesia’s proven oil reserves were estimated at 3.747 billion barrels, while proven gas reserves were 112.5 trillion cubic feet (tcf). Most of Indonesia’s proven oil reserve base is located onshore Central Sumatra, West Java and East Kalimantan. Central Sumatra is the largest oil producing region and the largest oil fields are Duri and Mina. The GOI has targeted 960,000 bpd for Indonesian oil and 7.56 bcfd gas production in 2009. The government is optimistic that the goal can be reached since in
January 2009, oil and gas production reached 963,269 bpd and 7.64 bcfd respectively. Additional oil and gas production will come from BP Tangguh, ExxonCepu, Pertamina EP, and Petrochina Jabung.
In 2008, the GOI awarded 41 PSC contracts which consisted of 34 oil and gas PSCs and seven coal bed methane PSCs. By the end on 2008, there were 64 producing working areas, and 139 non producing (exploration) working areas. From 64 working areas, 43 have been producing oil and gas.
In 2009, the GOI plans to have tender offering for 71 new oil and gas fields. It is expected that the government will sign production sharing contracts for 50 new oil and gas and 14 coal bed methane working areas. In May 2009, the GOI will announce tender offering for 24 new oil and gas, which are mostly located in the Eastern Indonesia. The tender consists of direct proposal tender for seven fields and regular tender for 17 fields. Kubu, North East Ogan Komering, Offshore West Java, Blora, North Makassar, East Simenggaris, and Digul (Papua) are offered through direct proposal tender. The regular tender consists of Tomini Bay I, Tomini Bay II, Tomini Bay III, Tomini Bay IV, Tomini Bay V, Tomini Bay VI, Tomini Bay VII, North Bone, Bone Bay I, Bone Bay II, Bone Bay III, Bone Bay IV, Menui, Morowali, Sula I, Sula II, and Bird's Head.
In 2007, investment in the oil and gas industry reached $11.2 billion, increasing from $9.7 billion in 2006. The investment in 2008 was $12.96 billion, which consisted of upstream activities costing $11.532 billion and downstream activities of $1.428 billion. It is expected that in 2009, investment will reach $17.706 billion, which will come from PSCs investing US$ 14.880 billion in production and $2.826 billion in exploration.
BP Migas reported that in 2009, oil and gas companies plan to drill 1,273 development wells, 182 wildcat wells and 20 delineation wells. In addition, they will conduct 21,405 km 2D and 7,124 km2 3D seismic surveys.
In its efforts to increase oil and gas production, BP Migas will reactivate old wells. BP Migas has indentified old wells in the working areas of Pertamina EP Cepu (1,967 wells), Pertamina Lirik (37 wells), Pertamina Kalila (8 wells), Kalrez (123 wells) and Chevron Pacific (236 wells). The GOI will give the opportunity to local cooperatives or state-owned regional companies to operate old wells. PT Pertamina has conducted several pilot projects in Central Java, and Jambi. The secondary recovery from the mature fields provides opportunities for American firms to introduce the Enhanced Oil Recovery technology (EOR).
For the downstream sector, the GOI will start selecting distributors of subsidized fuels. According to the Law No. 22/2001, Pertamina’s monopoly right in the management of fuel distribution was allowed until November 2005, however, only Pertamina has the capability to secure the supply and a sufficient distribution network in Indonesia. It is expected that in 2010, more companies will be ready for distributing subsidized fuel. For non-subsidized fuel, Pertamina currently competes with companies such as Petronas, Shell and Total, which have already opened public filling stations (SPBU) in several cities in Indonesia. Shell has 33 SPBUs in Jakarta, Tangerang, Depok, and Bekasi; Petronas has 16 SPBUs in Jakarta and Medan; Total has two SPBUs in Jakarta and will open additional three SPBUs this year.
Indonesia needs to build new refineries in order to meet domestic fuel demand. Currently, the existing six refineries produce one million barrel per day, while domestic demand reaches 1.4 million barrel per day. Pertamina must import 35% of the total domestic demand. The GOI plans to provide a tax holiday for the construction of new fuel refineries.
The GOI needs US$ 1.68 billion to develop city gas distribution network in nine cities in Indonesia. However, due to limited budgets, the government will only develop the gas network in Depok, Palembang, Surabaya and Bekasi. In 2009, the government will also conduct a study to develop gas infrastructure in nine cities: Pekanbaru, Muara Enim, Lampung, Cilegon, Subang, Bojonegoro, Bangkalan, Tenggarong and Sengkang.
By Anasia Silviati