Oil, gas sector urgently needs aggressive reform as targets missed

  • Indonesia has once again missed its oil and gas production targets amid mounting pressure from a more competitive investment climate, signaling an urgent need for aggressive policy reform in the mining sector.
  • The policy reform, as Upstream Oil and Gas Regulatory Task Force (SKK Migas) hopes, will enable a significant improvement in the industry’s investment climate.
  • SKK Migas planning deputy Benny Lubiantara said that the looming global recession and ongoing energy transition process had led to a greater need for significant change in how the government attracts investors to Indonesia.
  • Investments in oil and gas by the 3Q22 reached USD7.7bn. The figure only amounted to about 60% of 2022’s USD13.2bn target, despite marking the largest upstream investment on average in since 2015.
  • SKK Migas head Dwi Soetjipto explained that rising oil prices, which he predicted would be short-lived, would not positively impact investment in the oil and gas industry because more companies were investing in renewable energy while aiming to reduce debt and share dividends.
  • “The challenge is how [SKK Migas] transforms the oil and gas investment climate in Indonesia,” Dwi said.
  • Ahmad Zuhdi Dwi Kusuma, an industry and area analyst at state-owned Bank Mandiri, underlined that oil and gas companies tended to take advantage of rising global oil prices to pay off debt, such as Brazil-based Petrobras and United Kingdom-based British Petroleum.
  • “We have a 1mn barrels of oil per day [bopd] target in 2030, but lifting targets for 2023 have been lowered from 2022’s [target], showing a pessimistic perspective toward the domestic oil and gas industry,” he told The Jakarta Post on 18 Oct 22.
  • Oil prices continue to fluctuate and the energy landscape is evolving. Globally, the sector’s annual stock performance since 2017 has consistently lagged behind the S&P 500, a PricewaterhouseCoopers (PwC) study shows.
  • “The government has made sizeable positive changes in encouraging more investment in the sector, but stakeholders need to do five times more in this trying time,” he told the Post on 18 Oct 22.

External Link : https://www.thejakartapost.com/business/2022/10/18/oil-gas-sector-urgently-needs-aggressive-reform-as-targets-missed.html