With proven oil reserves of 3.17 billion barrels (bbl) and gas reserves of 100.37 trillion standard cubic feet (tscf), Indonesia is one of the key players in the international oil and gas industry. However, with years of supply-demand mismatch, the country has been importing oil since 2004. Indonesia’s crude oil production declined from 348 million bbl in 2007 to 292 million bbl at a compound annual growth rate of -1.7 per cent. However, it had succeeded in reducing its crude oil import from 115.8 million bbl in 2007 to 95 million bbl in 2012; the trend was reversed thereafter with imports increasing sharply to 141.6 million bbl by 2017. The decline in production can be attributed to the maturing of existing oil fields, a slower reserve replacement rate and decreased rate of exploration. It has been estimated that at the present rate of production, the country’s oil reserves will be finished within 12 years. Gas reserves are estimated to be enough for the next 25-50 years.

Besides, the oil and gas sector is quite significant to the Indonesian economy in terms of revenue contribution. Healthy growth in the oil and gas sector has the potential to fast-track the country’s economy. Given this backdrop, it is critical for Indonesia to open up new oilfields, attract investment in exploration, and deploy new technologies to increase production at existing fields.

The government is looking at awarding more oil and gas blocks for exploration and production.

In 2017, the Ministry of Energy and Mineral Resources offered 15 blocks, for which bid submission took place in May-December 2017. It finally awarded five blocks and the winners were announced in January 2018. Notably, global investors such as UAE-based Mubadala Petroleum and a consortium comprising UK-based Premier Oil Far East, Mubadala Petroleum and Singapore-based Kris Energy won two of the five blocks. In total, the five winners committed $23.57 million in investment within the next three years for exploration as well as pay signature bonuses worth $3.25 million to the Indonesian government.

Going a step further, the Indonesian government announced the offer of 26 oil and gas blocks for auction in 2018. By the end of the year, contracts for nine blocks were awarded to local and international investors under three bidding rounds. Southeast Asia Infrastructure provides an update on the same…

Auctions 2018

In February 2018, the results of the first round of bidding for oil and gas blocks were announced. The Indonesian energy ministry awarded contracts for four of the five blocks tendered as direct offers. The direct offer tenders are preceded by a joint study process by the oil and gas companies and the government to develop seismic data for the blocks. The companies involved in such studies gain rights to match the bids once the blocks are offered in the tender, thereby having an edge over other participants.

The winners in the first round include PT. Cogen Nusantara Energi and PT. Green World Nusantara for the Citarum work area; ENI Indonesia Limited for the East Ganal work area; Lion Energy Limited for the East Seram working area; and PT. Green World Nusantara and MOECO South Sumatra Company for the Southeast Jambi work area.

In the second round of bidding, the results of which were announced in August 2018, the government awarded two working areas – South Jambi B and Banyumas. South Jambi B was won by the Hongkong Jindi Group, which offered a $60 million investment commitment and $5 million bonus. The Banyumas’s bid was won by local company PT Minarak Berantas Gas, which offered an investment commitment of $4 million and signature bonus of $500,000.

In the third and final round of bidding for oil and gas blocks in 2018, the government put four exploration blocks up for auction in November 2018 but contracts were awarded for only three of these.

The four blocks are the South Andaman offshore block in Aceh, the South Saka Kemang onshore block in south Sumatra, the Anambas offshore block in Riau Islands, and Maratua, which is an onshore and offshore block in north and east Kalimantan. Joint studies have been undertaken for these blocks and hence they were placed in an auction under the direct offer scheme.

The Maratua block has reserves of 204.86 million barrels of oil (mmbo) and 890.09 billion cubic feet (bcf) of gas. The South Andaman block is estimated to hold 218.92 mmbo of oil and 1,234 bcf of gas; the South Saka Kemang block has 106.33 mmbo of oil and 603.91 bcf of gas; and the Anambas block has 260.36 bcf of gas and 26.04 billion standard cubic feet of condensate reserves.

The winners of the auction included Pearloil (Theralite) Limited for the South Andaman block; Talisman Java B.V. and Mitsui Oil Exploration Company Limited for the South Saka Kemang block; and Pertamina for the Maratua block. There was no winning bid for the Anambas block, which will be put on offer again. The total investment committed for the three blocks stood at $10.95 million, apart from a signature bonus of $6 million.

Future outlook

The Ministry of Energy and Mineral Resources has announced plans to offer ten oil and gas blocks in two auction phases during 2019. The auctions will comprise the Anambas, West Ganal and West Kaimana blocks as well as two exploitation blocks – West Kampar and Selat Panjang.