Production Target Faces Oil And Gas Reserve Challenges That Continue To Shrink

Oil refinery (between)

The ReforMiner Institute, an independent research institute in the energy economy, said that Indonesia's upstream oil and gas sectors face major challenges to meet oil and gas production targets amid intense global competition and energy price fluctuations.

According to ReforMiner Institute Executive Director Komaidi Notonegoro, one of the main causes of the major challenges in achieving the production target is the national oil and gas reserves which continue to shrink.

Based on data from SKK Migas 2024, oil lifting only reaches 605.5 thousand barrels per day (mapd), far below the APBN target of 660 boppds. For natural gas lifting, it recorded an increase of 2.2 percent to 960 thousand barrels of oil equivalent per day (mboepd) in 2023.

On the other hand, data from the Ministry of Energy and Mineral Resources in February 2024 noted that there were only 4.7 billion barrels of oil reserves left, while gas reserves were at 55.76 trillion cubic feet (TCF). Meanwhile, 60 percent of oil and gas working areas are classified as old fields, which require expensive technology to maintain production.

This condition, said Komaidi again, requires policy breakthroughs and regulations so that the oil and gas sector remains the backbone of the national economy.

"Without significant incentives, new exploration will not be attractive to investors," said Komaidi quoting Antara.

According to ReforMiner's records, foreign exchange needs for oil and gas imports continued to increase, reaching IDR 380.4 trillion in 2023, far beyond the average of IDR 290 trillion during 2015-2022. The National Energy General Plan (RUEN) projected to even estimate this figure will soar to IDR 1,391 trillion by 2030 if new explorations do not begin immediately.

"The dependence of imports not only burdens the country's foreign exchange, but also reduces our competitiveness globally," said Komaidi.

In addition to these challenges, continued Komaidi, the global energy transition also provides great pressure. Based on the 2017 RUEN, oil and gas will still contribute 34-44 percent in the energy mix until 2050. However, the existing fiscal policy does not adequately support natural gas-based projects or other environmentally friendly energy. The development of potential gas projects such as 43 undeveloped disclosures requires special incentives.

"We need to provide additional incentives to increase investment attraction, especially in the marginal field," said Komaidi.

Simplification of regulations is also a top priority to ensure the economy of the oil and gas project. Komaidi gave an example of the elimination of Land and Building Tax (PBB) of up to 100 percent during the exploration stage. In addition, incentives in the form of investment credit or additional capital returns for high-risk projects are being studied.

Based on data from the Ministry of Finance 2023, the upstream oil and gas sector contributed more than IDR 150 trillion to state revenues. The economic impact of this sector can also be seen from the dual effects on other sectors, such as services, logistics, and manufacturing.

"We are not only talking about direct acceptance, but also how this sector becomes a catalyst for economic growth," said Komaidi.

In addition to fiscal incentives, the use of new technologies is also part of the solution. According to Komaidi, the Enhanced Oil Recovery (EOR) technology has shown positive results in several old fields. SKK Migas data shows that the application of this technology can increase production by up to 20 percent in certain fields.

"Investasi teknologi seperti ini hanya akan datang jika ada kepastian hukum dan regulasi yang mendukung," katanya lagi.

In his study, the ReferMiner Institute also hopes that the government will support the energy transition through balanced policies. Environmentally friendly natural and geothermal gas-based projects need priority. Integration of fossil energy with new and renewable energy can be a bridge to a more sustainable energy mix.

"We cannot just leave the oil and gas sector, but must integrate it in the energy transition," said Komaidi.

With the right policy reform, according to Komaidi, the upstream oil and gas sector can remain the backbone of the national economy. This step will ensure the sustainability of investment, increase state revenue, and reduce dependence on imports.

"The government, business actors, and the community must work together to answer this challenge. Only with synergy, can we bring the Indonesian oil and gas sector to a better level," said the lecturer at the Faculty of Economics and Business, Trisakti University as well.