The Upstream Oil and Gas Regulatory Task Force (SKK Migas) will offer additional incentives to companies that are interested in managing oil and gas basins in open areas.
SKK Migas Deputy for Exploration, Development, and Work Area Management Benny Lubiantara, stated that the regulator would grant incentive recommendations. One such recommendation is to review the contract system, which includes cost recovery and gross split.
The proposed incentive entails the possibility of granting contractors an additional split, aimed at enhancing economic viability.
“The terms and conditions for the open area are more flexible as they can offer new regulations. The offering of terms and conditions has improved,” Benny said on Wednesday (17/5).
Prospect in the upstream oil and gas sector
SKK Migas stated that the incentives is also one of the attempts to enhance exploration activities. According to Benny, exploration is the foundation for increasing national oil and gas production by 2030, targeting 1 million barrels of oil per day and 12 billion cubic feet of gas per day.
Therefore, SKK Migas is urging an increase in the investment target in the upstream oil and gas exploration sector to US$3 billion or approximately IDR 45 trillion.
In 2023, the target was initially set at US$1.7 billion, an increase of 112 percent from 2022. This target was the highest upstream oil and gas investment since 2015.
The main reason for the increased investment target for the upstream oil and gas was the increasing demand for oil and gas energy during an ongoing transitional process. In relation to this issue, it is necessary to address the augment exploration investment by providing investor facilities related to competitiveness with other countries.
SKK Migas indicated that the discovery of large oil and gas reserves in the last 15 years has occurred in countries like Brazil, Suriname, and Mozambique, among others. These countries offer a simple fiscal regime for the upstream oil and gas sector, attracting many investors.
According to Wood Mackenzie data, Indonesia’s prospects and attractiveness are at a moderate level. Compared to neighboring countries in the region, Indonesia’s position is better than Thailand and Brunei, but still lower than Vietnam, Malaysia, and Australia.
Vast oil and gas discoveries
SKK Migas reported that 26 open area basins contain 23.6 billion barrels (BBO) resources and 271.4 trillion cubic feet (TCF) of gas. Notably, there are three areas with the most abundant oil resources: the South Sumatra basin with a possible resource of 3.5 BBO, the North Sumatra basin with 2.7 BBO, and East Java basin with 2.7 BBP.
In addition, the open area basins with the largest gas resources include the Bintuni basin with a potential of 72.7 TCF, the North Sumatra basin with 51.3 TCF, and the Aru-Tanimbar basin with 23.7 TCF.
SKK Migas is optimistic that the discoveries of oil and gas exploration basins this year could surpass previous year. Additionally, in 2022, SKK Migas successfully drilled a total of 30 basins, surpassing the pre-Covid 19 endemic realization in 2019, which was 24 basins.
The exploration investment in 2022 also increased by 33 percent to US$0.8 billion, compared to US$0.6 billion in 2021.
