Overview of Indonesia’s gas sector

By the end of 2020, Indonesia’s proven natural gas resources recorded in the BP Statistical Review of World Energy 2021 (BP 2021 Report) amounted to 44.2 trillion cubic feet. Gas production reached 63.2 million tonnes per annum, representing 64% of the total oil and gas production in Indonesia. Of the foreign production, 16.8 billion cubic metres was exported as LNG and 7.3 billion cubic metres was exported through pipelines.

According to the PwC Oil and Gas Guide 2020 (2020 PwC Guide), Indonesia has the sixth-largest coal bed methane reserves in the world at 453 trillion cubic feet. Shale gas reserves are estimated at 74 trillion cubic feet.

Indonesia’s main areas for gas production are South Sumatra, East Kalimantan, the Natuna Sea, Sulawesi and West Papua.

In 2017, a number of upstream projects were declared strategic projects by the Indonesian government in an effort to increase oil and gas production. These include Tangguh Train-3, Chevron’s deepwater development project, the Jangkrik field development project, and the development of the Jambaran-Tiung Biru block and Genting’s Kasuri block.

According to the SKK Migas Bulletin in October 2020, SKK Migas targeted 12 projects to commence production in 2020. Furthermore, in 2021, the government opened tenders for the following 6 contract areas: i) South CPP (onshore Riau); ii) Sumbagsel (onshore South Sumatra); iii) Rangkas (onshore Banten and West Java); iv) Liman (onshore and offshore East Java); v) Merangin III (onshore South Sumatra and Jambi); and vi) North Kangean (offshore East Java).

LNG facilities in Indonesia include Bontang (East Kalimantan), Tangguh (West Papua), and Donggi Senoro (Sulawesi). In a 15-year road map published by the Directorate General of Oil and Gas in April 2016, the government forecasts a need for USD $24.8 billion in investment to enhance gas infrastructure.

Overview of Indonesia’s oil sector

According to the BP 2021 Report, there were 2.4 billion barrels of proven oil reserves in Indonesia as of the end of 2020, putting Indonesia at number 22 among the world’s oil producers; oil production reaches 708,000 barrels of oil per day. This is a 4.9% decrease from the production rate in 2019. In 2018, Indonesia’s oil and gas revenue contributed to roughly 7% of state revenue.

The SKK Migas Annual Report in 2020 recorded that after terminating 18 PSCs in 2019, Indonesia had a total of 189 production sharing contracts (PSCs), comprising 70 PSCs in the exploration stage, 95 PSCs in the exploitation stage, as well as 24 non-conventional hydrocarbon PSCs.

Most oil upstream activities are focused in Western Indonesia, with the main areas for oil production being Sumatra, the Java Sea, East Kalimantan, and the Natuna Sea. The government has been encouraging exploration activities in eastern parts of Indonesia, where, according to the 2020 PwC Guide, 39 tertiary and pre-tertiary basins show rich promise in hydrocarbons.

Major companies are involved in oil exploration and exploitation in Indonesia, including BP Tangguh, ConocoPhillips, Medco, and Mobil Cepu Ltd.

In the downstream sector, there are 9 oil refineries in the country with a combined installed capacity of 1.1 million barrels per day.

Indonesia’s second bidding round in 2022

As announced by Minister Arifin Tasrif, “Southeast Asia’s biggest economy set a target to reach 1 million barrels of oil per day and 12 billion standard cubic feet per day of gas in 2030 to meet national energy demand”.

In November 2022, according to a statement by the Indonesian Ministry of Energy and Mineral Resources, the Ministry launched a bidding round on 4 oil and gas blocks, as the country seeks more investments in its upstream oil and gas sector.

The offered blocks are Sangkar block in offshore and onshore Central and East Java, Bunga block in offshore East Java, Peri Mahakam block in offshore and onshore East Kalimantan and Bose block in onshore and offshore East Nusa Tenggara.

According to Ministry data, the 4 blocks offered in the second round of bidding this year have a combined estimated resources of 3,730 million barrels of oil and 300 billion cubic feet of gas.

Furthermore, the Indonesian government also awarded the West Kampar block to a consortium of Aserra Petrolindo Gemilang and SPR Langgak that agreed to invest USD $32.5 million in exploration and exploitation activities and a USD $250,000 signature bonus.

The Agung I and Agung II exploration blocks

In June 2022, BP announced that the company had signed 30-year production sharing contracts (PSC) for the Agung l and Agung ll exploration blocks with the government of Indonesia, following the decision to award the 2 gas blocks to BP on the second round of 2021 on 18 March 2022.

As stated by Nader Zaki, BP Regional President Asia Pacific, “BP’s presence in Indonesia is now extended from the east in Papua Barat through our Tangguh LNG, the largest gas-producing field in Indonesia where we are also progressing one of our major CCUS projects, to the west in Aceh through our partnership in Andaman II, and now is complemented by adding Agung I and Agung II in East Java”.

The Agung I Block covers an area of 6,656 square kilometres deepwater offshore Bali and East Java, while the Agung II Block is located in deepwater offshore of South Sulawesi, West Nusa Tenggara and East Java covering an area of 7,970 square kilometres.

The area is underexplored with significant potential of gas resources, close to growing gas demand. BP’s Executive Vice President for Gas & Low Carbon Energy, Anja-Isabel Dotzenrath highlighted that “BP is very proud of being a strategic energy partner of Indonesia, as one of the largest foreign direct investors in the country. We are so excited with the addition of Agung I and II Blocks to our portfolio of assets, and we are committed to continue growing our gas and low carbon business in Indonesia”.

Other projects and investments

  • Kuwait Foreign Petroleum Exploration Company (Kufpec) is in the market for a company to carry out the concept selection and pre-front end engineering and design study work to exploit its 2022 Anambas significant gas condensate discovery block offshore Indonesia.
  • Indonesian independent Medco Energi is forging ahead with the development of the next field on its flagship producing South Natuna Sea Block B offshore Indonesia; Medco has started the tender ball rolling for the engineering, procurement, construction, and installation contract for its West Belut project.
  • Eni is reportedly in talks to acquire private equity-backed United Kingdom independent Neptune Energy in a deal worth a potential USD $5 billion to USD $6 billion; Neptune currently produces some 130,000 barrels of oil equivalent per day from fields in countries including the United Kingdom, Norway, Algeria, the Netherlands, and Indonesia – the Southeast Asian nation where it has upstream operations with Eni.

About the Author: Felipe Gaitán Michelsen