Ministry of Energy and Mineral Resources (ESDM) is designing a new business model to optimize the country’s national energy reserves, which currently only last for around 20 days.
This new business model is aimed at ensuring that energy reserves worth around Rp70 trillion (US$4.4 billion) will not become passive assets, but can provide benefits through attractive business mechanisms.
Acting Director General of Oil and Gas at the Ministry of ESDM, Dadan Kusdiana, said that this effort is part of the government’s strategy to make energy reserves a more dynamic instrument.
“We are currently working on ensuring that these energy reserves do not become passive stocks, but become stocks that can be attractive through business mechanisms,” Dadan said while addressing the Indonesia Policy Dialogue held by Katadata, on Wednesday, December 11, 2024.
To preparing a new business model, according to Dadan, the government will also boost domestic oil and gas production by increasing foreign investment. He cited, there are two main approaches that have been designed, namely expanding State energy company PT Pertamina’s international activities and implementing contract flexibility with international oil and gas companies.
Dadan said that the government is eyeing oil and gas development opportunities in South Africa and Algeria. In both countries, the profit-sharing scheme allows oil and gas companies to obtain ownership rights over oil and gas production.
“We are looking for ways to send oil and gas mining results in Africa to the country,” he said.
Attracting investment
To attract investors, government has increased the profit-sharing percentage from 15 percent to 50 percent for oil and gas companies investing in Indonesia. In addition, the investment return rate (IRR) will be maintained at around 13 percent to 17 percent to minimize risk and increase investment attractiveness.
Contract flexibility is also a key strategy, allowing companies to choose between increasing selling prices or sharing production results.
“So, by any means, domestic oil and gas investment must be attractive,” Dadan said, while expressing hope that this effort will increase national oil and gas production and simultaneously strengthen Indonesia’s energy security amidst global challenges.
