Opportunities in Indonesian oil development
Indonesia, South East Asia’s largest economy and the region’s largest oil producer, is faced with declining production from its mature fields and rising consumption from its burgeoning population. According to state regulator SKK Migas production declined by nearly 22%, to less than 850,000 barrels per day, in the decade to 2015 while oil consumption increased by around 25% in the same period as measured by BP’s authoritative Statistical Review of World Energy. Indonesia became a net importer of oil leading it to suspend its long-standing membership of OPEC in 2008.
24th in the list of oil producing countries, Indonesia does not lack oil but lacks investment in exploration and infrastructure to ring new fields online. Economic growth and an expanding middle class are increasing demand for energy. In January 2015, the government took advantage of a world-wide slump in oil prices to end subsidies for petrol removing an anomaly from the market.
The government has revised terms for foreign investment in the oil industry to attract the investment needed for exploration and development. The portion of yields for the investors has been increased from 15% to 30 – 35% for investors in oil and from 30% to 35 – 40% for those engaging in the gas business.
The exploration period (especially for deep-sea exploration) has been increased from a maximum of 10 years to 15 years. The split of production share from the PSC system to Dynamic Split or Sliding Scale Over Revenue Cost (R/C).
Parallel to the above, the Government has also committed to simplifying regulations and permit process from 300 days to 90 days and to cut down required permits from 49 to eight.
In addition, the Government will accelerate gas infrastructure development as part of the effort to accelerate development in Indonesia. The emphasis on infrastructure development will mean better roads, more bridges and expanded airports, as well as the construction of pipelines, refineries, storage and electricity facilities.
Despite growing manifestations of nationalism towards natural resources there has been no easing of the government’s commitment to honouring the terms of production sharing agreements with foreign investors. The national oil company, Pertamina controls the largest acreage in terms of concessions the U/S. Chevron contributes 40% of the country’s production.
The technocrat, Archandra Tahar has been reinstated in government this year as deputy energy minister, having been fired in August after a mere 20 days as oil minster following a furore over him having dual Indonesian – U.S. citizenship, which is not allowed in the country. The 47-year old Tahar spent 20 years in the U.S. and is an experienced oil industry executive. He relinquished his U.S. citizenship. It is speculated that he does not favour U.S. companies in the Indonesian energy sector to avoid accusations of bias. Tahar is an offshore oil exploration specialist and that’s where major new oil fields are expected to be located in Indonesia.
One expert on Indonesia’s economy says: “Investing in Indonesia’s oil and gas sector at this moment has never been so timely, especially when the price of oil today is still low. In fact, this is the best time to boost exploration as the goods and service costs are also in steep decline resulting in a much lower exploration cost in comparison to previous years”.
Yes to business is pleased to introduce Shabel Sukma Persada (SSP), an Indonesian Limited Liability Company.
Richard Gorry, director at consultant JBC Asia, “What has changed in Indonesia is that they have a new government there and a new regime and this creates opportunities.” Gorry said.
Indonesia’s private sector is eager to help towards these targets. Shabel Sukma Persada (SSP), an Indonesian Limited Liability Company (PT) established in 2014 by a group of experienced Indonesian oil executives is seeking investors to acquire 100% of the assets of a Technical Assistance Contract on the already producing Bravo field in Sumatra The CEO, Pak Budiono, a former VP Exploration with ExxonMobil Indonesia says they need US $12-14 million which will yield $17 million profit to the investor over five years. The IRR is projected at 43%.
Another field SSP is seeking to acquire is the Phoenix field which is under exploration and is subject to a Production Sharing Contract until 2040. Mr. Budiono wants to raise up to US$ 20 million to acquire a 70%stake in the field, projecting an IRR of 59%. Phoenix is a gas and oil field and PSS’ plan is produce gas, adding oil production one year later.
For further information on these fields including geophysical studies and financial forecasting please send GBP £500 to the account of Yes-to-Business Ltd
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