The document discusses Indonesia's oil and gas industry and investment outlook. It notes that while Indonesia has significant oil and gas reserves, production and reserves have been declining in recent years due to decreasing exploration investment. To meet its 2030 production targets, Indonesia will need to attract $187 billion in upstream investment, primarily for large, deepwater exploration prospects. However, major foreign oil companies have been exiting Indonesia due to unfavorable fiscal terms and bureaucracy. Domestic participation from local conglomerates may be needed if terms are improved. The future of oil is uncertain as demand is expected to peak by 2030-2040 due to environmental concerns, with renewables becoming the fastest growing energy source. Oil companies are shifting investments to unconventional

1. “It is a misperception saying Indonesia is a rich
country in oil and gas”. SKK Migas Annual Report 2016
SKK Migas Annual Report 2020

6. Source: Handbook ESDM 2921
Source: BP Stats. Rev. 2022
INDONESIA : Proved Reserves

7. Source: Ann.Rpt. SKK Migas 2021
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
INDONESIA NATURAL GAS: Dayly Production
MMSCFD
(BCF/Day)
DAYLY PRODUCTION NATURAL GAS
Source: Ann. Rept. SKK Migas 2020
Source: BP Stats. Rev. 2022

8. Source: Ann. Rept. SKK Migas 2020
2011 2012 2013 2014 2015 2016 2017 2019 2020 2021
NATURAL GAS: Proved Reserves (TSCFGas)
Source: BP Stats. Rev. 2022

9. Source Ann. Rept. SKK Migas 2020

11. Conventional Contracts Signed
Source: Statistik Migas 2021 – Ditjen Migas

12. Oil & Gas Upstream Investment 2016 – 1st Semester 2021
Source: Statistik Migas 2021 – Ditjen Migas

13. Source: Statistik Migas 2021 – Ditjen Migas

14. Number of Wells/
Number of Wells/
Source: Statistik Migas 2021 – Ditjen Migas
Number & Results of Exploration Drilling

15. Source Ann. Rept. SKK Migas 2020
Profile of Assumed Oil & Condensate Production
Increase Based on POD Approvals 2003 - 2020
Profile of Assumed Gas Production Increase
Based on POD Approvals 2003 - 2020

16. Source Ann. Rept. SKK Migas 2020
Resource Replacement Ratio 2010 - 2020

17.  Continuous decline of Oil & Gas Production, as well as decline in Oil & Gas
Reserves.
 Decline in Exploration Investment, as reflected in the Total Exploration
Expenditures, the number of wells drilled and the decline in seismic
acquisitions, while the decline in new contracts signatures indirectly also
contributed to the decline in exploration spending.
 Between 2011 – 2017 the Reserve Replacement Ratio RRR has always been
smaller than 100% indicating that the newly discovered volumes of Oil &
Gas were less than the produced volumes of Oil & Gas. The rise in RRR
volumes recorded between 2018 – 2020 are not (?yet) reflected in the Proved
Reserves recorded.

18.  Concentrate on large Potential Prospects.
 Concentrate on the most attractive areas (geology, large reserves), which
are most likely located in deep-water environments.
 It can be assumed that all “easy” oil has been discovered, look for the
“more sophisticated” exploration model.
 Include sophisticated (?EOR) technology in the early exploration stage of
reserves valuation, such as the treatment of tight reservoirs.
 Improve legal/bureaucratic Contract Environment to stimulate
Exploration Investment, especially from the large international oil
companies.

20. ANDAMAN SEA
Deepwater !!

21. EAST NATUNA BASIN
The increasing intensity of CCG (Chinese Coast Guard)
encroachments has been motivated by the discovery of
economically viable oil fields in Kasawari (in 2011),
located in Central Luconia off the coast of Sarawak,
and Tuna Block (in 2014), located in the northern part
of the Natunas. Beijing has demanded that both
Malaysia and Indonesia cease their oil exploration and
exploitation on the contested continental shelves
Potential Territorial Conflict !!
Logistics ??

22. MAKASSAR STRAIT
Deepwater !!

23. ABADI GAS FIELD

24. • REQUIRED INVESTMENT: The Indonesian government estimates that $187 billion needs to be
invested in its upstream sector to meet its 2030 oil and gas production targets of 1 million barrels
per day of oil and 12 billion cubic feet per day of gas (ESDM).
• EXPLORATION TARGETS: As the stated production targets have to be achieved in the short 8 years
time-span between 2022-2030, the exploration targets should primarily comprise large resource
volume exploration prospects. These would most probably comprise deep-water targets, which would
require the financial and technological resources and the willingness to bear the huge exploration
risk, which is the domain of the established international oil companies.
• EXIT FOREIGN OIL: However, major foreign investors are already exiting Indonesia. The recently
announced departure of ConocoPhillips extends the list of global oil and gas companies leaving
Indonesia. ConocoPhillips divested its stake in the Corridor Block to local independent Medco
Energy. TotalEnergies has already left, and Chevron is seeking to sell its Indonesia Deepwater
Development (IDD), while Shell is trying to sell its share of the Masela project, also known as the
Abadi.
• POTENTIAL DOMESTIC PARTICIPATION: Another possible source for investment would be the
local conglomerates if government could make it attractive for them, because they certainly have the
financial resources. “But they are unlikely to participate – because of the onerous fiscal terms
levied on upstream oil and gas, which are not present in other sectors in Indonesia, and of course,
the 10-15% chance of commercial success for exploration” (Peter Cockcroft – ENERGY VOICE, Dec 2021).

26. OIL INDUSTRY MATURITY CURVE
Source: Shaping the oil company of the future - Prism / 1 / 2019
After over a century of growth in the industry, technological improvements, environmental concerns, social trends and
government policies will all impact demand for oil. This will lead to a peak and decline, which is likely to happen
between 2030 and 2040.

27. Growing concerns about climate change following the Conference of Parties 21 (COP 21) Paris Agreement,
where 170 countries agreed to try limiting global warming, has resulted in hardening investor sentiment
towards carbon emissions, leading to the following developments:
 Industry including oil companies come under pressure from shareholders, governments and climate
activists to reduce carbon emissions from their hydrocarbon businesses to limit global warming.
 The rise of renewable energy. According to BP’s 2018 Energy Outlook, renewable energy will be the fastest
growing source of energy, increasing five-fold by 2040 thus providing around 14% of global primary
energy. The rising cost of oil extraction also contributed to the rise of renewable energy.
 The biggest shift away from oil as the energy source will be in the transportation sector which represents
the biggest sectoral consumer of oil.
 Of the six “super-majors” – BP, Shell, Chevron, Total, Eni and Exxon – many of them have pumped billions
into clean energy projects, although question marks remain over whether they are doing enough.
 Despite the growth in renewables, “big oil” only spent 1% of its combined budget on green energy schemes in
2018.
Reaction of the Oil Industry

28. Source: DNV.GL Energy Transition Outlook (2017)

29. Power capacity additions by fuel from 2017 to 2040

32. FACTORS/ASPECTS EVALUATED:
Fiscal terms, Taxation in general, Environmental regulation,
Regulatory enforcement, Cost of regulatory compliance, Protected
areas, Trade barriers, Labor regulations & employment agreements,
Quality of infrastructure, Quality oh geologic data-base, Labor,
Disputed land claims, Political stability, Security, Regulatory
duplications & inconsistencies, Legal system.
Score: most attractive 100, greatest barriers 0
Note: A study on this subject by Riswan et al (2018) concluded that Government Regulations & Policies were the most
important factors in determination of attractiveness for investment in the oil & gas sector in Indonesia

33.  The demand for oil is expected to peak and decline between 2030 – 2050, the
principal causes being environmental concerns (primarily climate chance) and the
social & government response, technology advance, increasing cost of oil
extraction, and the surge of renewable energy.
 Renewable energy wil become the fastest growing, their share of power output will
reach or exceed 20% before 2035.
 To sustain their existence and growth it would force oil companies to transform
from oil to energy companies. The financial implication would be that a growing
share of their Capex will be in renewable energy development at the cost of oil
and gas investment.
 Oil companies are retargeting their investments into unconventional and deep-
water fields. In 2017 oil majors dedicated almost 70% of global budget to offshore
and unconventional assets. Source: Arthur D. Little, 2019

34.  Create an business friendly legal environment where contacts are “sacred” to
attract foreign investment in the oil and gas industry.
 Try to involve domestic large enterprises to invest in the oil business.
 The tendency of majors to invest in deep-water prospects should be exploited
to sell the prospective deep-water areas like Andaman Sea, Makassar Strait
and the Arafura shelf edge (Abadi Gas).
 Avoid overbearing “Indonesiation” negatively affecting foreign investment
interest in the oil and gas business.

35. Source: KOMPAS 07 September 2022