A. Rinto Pudyantoro, a lecturer at the University of Pertamina, has identified 12 business risks associated with oil and gas investments. These risks, applicable globally and in Indonesia, encompass fiscal, economic, market, subsurface, technological, quality, cost, labor, time, environmental, security, and political.
Rinto emphasized the importance of the government’s role in controlling these risks to facilitate smoother business operations. However, Rinto acknowledged the government’s limitations in managing all the identified risks.
“Out of the 12 risks, only one can be entirely controlled by the government, which is fiscal,” Rinto told a media briefing at the IPA Convex event in Jakarta, on Thursday, February 1, 2024.
He said that the government held full control over fiscal aspects in the upstream oil and gas sector, allowing it to enact policies without external interference.
While some of the other 11 risks can be partially managed, Rinto emphasized that there is no guarantee of complete success. Factors such as security, economic conditions, market dynamics, political stability, among others, are challenging to control entirely.
Rinto expressed hope that future Indonesian leaders would play a crucial role in fostering a conducive environment for upstream oil and gas businesses by effectively managing these risks.
He urged the new government to focus on improving the ease of doing business in the upstream oil and gas sector and addressing operational challenges. “The government we hope for is one that can support the growth of upstream oil and gas businesses,” he added. According to Rinto, minimizing risks would make investments more appealing to potential investors, whereas heightened risks could deter investment.
In addition to risk management, Rinto advised the incoming government to avoid controversial decisions that might create uncertainty for investors. He also emphasized the need for improvements in agreements, tax treaties, and other operational aspects affecting upstream oil and gas activities.
Regarding the new leadership, Rinto proposed, “It would be better if the next five years were used to fix shortcomings, such as streamlining licensing processes and accelerating project commercialization. Why does it take 7 years here when Petronas in Malaysia can finish in 2-3 years?”
Oil and gas investment in 2023
In a related context, the Investment Coordinating Board (BKPM) reported positive outcomes in the oil and gas sector, with a record-high investment of USD 13.7 billion or approximately IDR 210 trillion in 2023. This marks the highest investment in the last eight years, surpassing the global growth rate of oil and gas investments estimated at 6.5 percent.
Dwi Soetjipto, Chirman of the Upstream Oil and Gas Regulatory Task Force (SKK Migas), attributed this achievement to the government’s efforts and policies that improved the investment climate. He expressed gratitude for the success of Indonesia’s Oil & Gas 4.0 strategic plan and the oil and gas sector’s ability to adapt to challenges amid the ongoing energy transition.
The continuous increase in oil and gas investments signifies restored investor confidence and highlights Indonesia as an attractive destination for investment in the sector.
