Govt Strategic Measures to Increase National O&G Reserves

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 677.Pers/04/SJI/2019

Date: 27 November 2019

Govt Strategic Measures to Increase National O&G Reserves

O&G upstream business contributes around 30% of state revenue. The business is also key to reserve discovery to increase national O&G production. After 18 years ago when Abadi Gas Field was discovered, there has been no significant discovery of O&G reserves that 85% of our oil and gas production depends on mature fields.

These points were expressed by Head of Geological Agency of Ministry of EMR, Rudy Suhendar, who represented Minister of Energy and Mineral Resources to open the "HAGI-IAGI-IAFMI-IATMI Joint Convention Yogyakarta 2019" (26/11). This biannual event is the meeting of experts the members of several professional organizations, namely Indonesian Association of Geologists (IAGI), Indonesian Association of Geophysicists (HAGI), Indonesian Association of Petroleum Engineers (IATMI), and Indonesian Association of Oil and Gas Production Facility Engineers (IAFMI) with regional governments and academics.

Rudi says that in the last 10 years, the national O&G reserves have decreased significantly. This is evident from the downward trend in O&G lifting. The low level of new reserve discovery and the absence of giant O&G reserve have made Indonesia O&G production predicted to be on a negative trend until 2050.

The government eventually take strategic measures. "In terms of O&G regulation, the government have cut O&G licensing from 286 to 186 in 2018 and opened the access to O&G data. Next, to increase investment and promote efficiency of upstream O&G governance, O&G contract regime is shifted from cost recovery to gross split," Rudy said.

The gross split is proven to be more efficient and ensures state revenue while promoting O&G reserve discovery. Firm exploration commitment fund generated by the gross split scheme is used to finance exploration activities to increase national O&G reserves.

Rudy says that in the first semester of 2019, 42 O&G blocks under the gross split scheme contributed Rp33.6 trillion of commitment fund (firm exploration commitment) to the State Budget, much higher than the previous Rp50-70 billion per year originated from the cost recovery scheme. At the same time, these contracts added Rp13.5 trillion of Non-Tax State Revenue from signature bonus which is directly transferred to the state treasury.

Rudy also says that the opportunity to find new reserves is very open. Indonesia has 128 basins, with 54 basins explored and have 3.8 billion barrels of reserves, and the remaining 74 basins unexplored with total proven and potential reserves of oil 7.5 billion barrels.

"Geological and geophysical experts and practitioners are expected to play important roles in finding new plays in frontier and in 13 potential, focus areas. Meanwhile, the support from petroleum experts and practitioners are also expected to develop new technologies, especially those used to carry out exploration and exploitation activities in deepwater area and to increase production of marginal fields," he continued.

The trend of O&G exploration in the last decade has been shifted to eastern Indonesia. The future challenge of the upstream O&G activity is to discover giant field. According to Rudy, the Geological Agency has also conducted general surveys at several locations in eastern Indonesia to increase O&G geological data of frontier and open areas, in the forms of airborne magnetic survey, G&G survey, 2D seismic survey, microseepage survey, and Passive Seismic Tomography. Another concrete step recently taken by the government is to conduct the largest 2D seismic survey that runs 30,000 km over at least 29 basins, starting in Bangka Sea and finishing in Seram Sea. This survey is funded by firm exploration commitment fund (exploration fund). (IY)

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