Our Budget is Spent for Intended Targets, Says Oil and Gas Director General about Performance in 2021

MINISTRY OF ENERGY AND MINERAL RESOURCES

THE REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 29.Pers/04/SJI/2022

Date: 19 January 2022

Our Budget is Spent for Intended Targets, Says Oil and Gas Director General about Performance in 2021

The Ministry of Energy and Mineral Resources (EMR) announced that the oil and gas subsector has delivered a positive performance throughout 2021.

Director General of Oil and Gas of the Ministry of EMR, Tutuka Ariadji, said his work unit has successfully achieved targets, such as tenders of oil and gas work areas (WK), domestic use of gas, and non-tax state revenues (PNBP) from oil and natural gas resources.

"In 2021, we invited tenders for 14 conventional oil and gas work areas, above the targeted 10 work areas, or 140 percent," said Tutuka in an opening-of-year press conference held on Wednesday (19/1).

The tenders for conventional oil and gas WK were done in two rounds. Round 1 was held on June 17, 2021, for 6 WK, while Round 2 was held on November 29, 2021, for 8 WK. "From Round 1, we have announced the winners and executed the production sharing contracts for 2 WK, namely Liman and South CPP," said Tutuka.

The success in adding the number of oil and gas work areas put out to tender in 2021, Tutuka continued, is inseparable from efforts to draw interest in the work areas on offer. The Directorate General of Oil and Gas has continued to improve the format and the terms & conditions of production sharing contracts to make them more attractive, among others, by providing flexibility to choose the contract format in accordance with Regulation of the Minister of EMR Number 12 of 2020, and increasing contractor split. For oil, the split starts from 80:20 for contracts with very low geological, infrastructure, and resource risks to 55:45 for very high-risk contracts. For natural gas, the split is 75:25 for very low risk contracts to 50:50 for very high risk ones.

Domestic gas use in 2021 came at 66%, slightly exceeding the set target of 65%, so the performance realization is 101%. The Ministry of EMR will continue to increase gas use for domestic needs in a bid to support the growth and development of domestic industries.

The oil and gas lifting in 2021, one of the components in the calculation of state revenues, clocks up at 660.25 MBOPD for oil (93.65% of the target) and 981.98 MBOEPD for natural gas (97.51% of the target ), while the ICP is averaged at US$68.47 per barrel, or 152% of the target. The oil and gas lifting fell short of target due to low entry point at the start of 2021, unplanned shutdown, and delayed fields onstream.

To anticipate these issues, the Directorate General of Oil and Gas will continue efforts to increase oil and gas lifting. "These include optimizing the production of existing fields, accelerating the transformation of resources into production by speeding up the POD of new fields, and developing pending fields," added Tutuka.

The Directorate General of Oil and Gas will also optimize incentives and monetization of undeveloped discovery, Enhanced Oil Recovery (EOR) in potential fields, and implement Firm Commitments to discover new prospects and leads. "Additionally, we'll speed up the licensing process and improve coordination with relevant agencies to hasten the settlement of operational issues in the field," added Tutuka.

Next, the PNBP from oil and gas natural resources runs at Rp97.98 trillion, and has exceeded the target by 130%. The rise in the oil and gas PNBP has been due to increase in ICP and the stability of world's oil prices. Meanwhile, the PNBP from Other Activities reached Rp5.21 trillion, or 130% of the target.

The oil and gas investment in 2021 hit USD15.9 billion, or 94.59% of the 2021 target of USD16.81 billion. There are several issues that hinder investment, especially in the downstream business, all of which relate to cost efficiency of RDMP and GRR plants.

On this occasion, the Director General of Oil and Gas emphasized that the policy for adjusting gas prices for certain industries and electricity would continue to be implemented and monitored. "This policy has supported 7 industry sectors. For example, it has increased production and sales volume in the fertilizer industry by 7.79% as well as increasing export production and sales by about 40,000 tons in the petrochemical industry in 2020," explained Tutuka.

The gas price adjustment policy has also played a role in the plan to increase investment by Rp191.08 trillion in the 7 industry sectors in the 2021-2025 period.

The Directorate General of Oil and Gas also continues to provide energy access for the community, for example, through the development of household gas networks. A total of 126,876 house connections in 21 regencies/cities had been installed at the end of 2021. Moreover, to support economic recovery, as many as 3,448 converter kit packages had been given out to farmers in 15 regencies/cities.

To increase the share of New, Renewable Energy (NRE) in the National Energy so as to support environmentally-based and sustainable development, the Indonesian government is committed to continue the biofuel B30 program. In the period of January-December 2021, as much as 30.79 million KL of B30 has been distributed with a saving potential of US$4.45 billion.

To improve the reliability of the oil and gas industry, especially in downstream business, the Directorate General of Oil and Gas issued 29 processing business permits, 171 storage business permits, 1,501 transportation business permits, and 214 commercial business permits.

In total, the Directorate General of Oil and Gas realized 98.62% of its budget until the end of December 2021. Most of the funds had been used to finance the construction of oil and gas infrastructure which directly benefited the public. "The Directorate General of Oil and Gas is committed to ensure that our budget is spent for the intended targets and in an accountable manner," Tutuka concluded. (IY)

Head of Bureau of Communication, Public Information Services, and Cooperation

Agung Pribadi (08112213555)

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