Home Market Crude Oil Prices Up, Sours Upstream Oil and Gas

Crude Oil Prices Up, Sours Upstream Oil and Gas

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Jakarta -Passion of investment in the oil and gas sector that previously dimmed is believed to increase in the second half of 2018, following the continued increase of world crude oil prices.

The effect of rising crude oil prices on the upstream oil and gas industry became the headline of the print newspaper Bisnis Indonesia edition Friday (8/6/2018). Here’s the full report.

Executive Director of Indonesia Petroleum Association (IPA) Marjolijn Wajong said that oil price hike is one of the drivers of investment in the oil and gas sector, especially for the exploitation work areas that have started spraying oil.

According to him, the upstream oil and gas investment has not been seen directly in the first half of this year.

“The investment will begin to be felt in the third and fourth quarters. The upward trend will start to appear at the end of the third quarter, “reported by Bisnis Indonesia on Thursday (7/6).

For unexploded exploration work areas, Wajong said the period of rising oil prices will only have an impact on the spirit of finding new reserves. “Because the exploration process takes years,” he said.

Based on data from the Upstream Oil and Gas Upstream Business Unit (SKK Migas), the realization of upstream oil and gas investment in January-May 2018 amounted to US $ 3.7 billion or 26 percent of the 2018 target of US $ 14.2 billion.

Data from the Ministry of Energy and Mineral Resources noted that the total upstream oil and gas investment started to decline from US $ 20.37 billion in 2013 to US $ 10.26 billion in 2017.

Wajong believes that KKKS is usually just beginning to prepare investment planning in the first half of 2018 so that investment in the sector is still low.

So far, an increase in crude oil prices since the beginning of this year has contributed positively to the country’s revenues from the oil and gas sector. The realization of state revenue from the oil and gas sector during the period of January to May 2018 reached US $ 6.9 billion or 58% of this year’s target of US $ 11.9 billion.

Head of SKK Migas Amien Sunaryadi said the construction of operating facilities can boost oil and gas investment. “One of the PoD, Merakes has been completed and has an investment value of US $ 1.05 billion,” he said on Thursday (7/6/2018).

Head of Program and Communication Division of SKK Migas Wisnu Prabowo Taher stated that the low level of realization of oil and gas investment is triggered by seasonal factors. Generally, in the first half of the planned programs are still waiting for the schedule of operations.

“So, like drilling schedule, waiting for rig preparedness, and land preparation. We have not put it into an investment because there is no cost that was disbursed, “he said, Wednesday (6/6) night.

Wisnu estimates that drilling and other activities are more intensive in the second half of 2018 than in the previous semester.

According to him, the level of oil and gas investment will potentially increase after the Ministry of ESDM gives certainty of new contract on termination block.

In total, 2018 has signed a total commitment of 2017 and 2018 direct appointment schemes, as well as new contracts of oil and gas blocks terminated 2018 and 2019 worth US $ 933.66 million. Throughout the year, Indonesia has recorded a definite commitment with a total value of US $ 933.66 million.

INVESTMENT MOMENTUM

Director General of Oil and Gas at the Ministry of Energy and Mineral Resources Djoko Siswanto also said that oil and gas investment trends are starting to stretch in the second half of 2018, especially in the third and fourth quarters.

Oil and gas investment will also be encouraged by the auction of work area and a definite commitment from the new contract block whose contract is over.

Djoko stressed that the world oil price hike should be a big momentum for oil and gas contractors to start investing.

Meanwhile, members of Commission VII DPR Kurtubi assess the legal umbrella of the law does not support upstream oil and gas investment despite the oil price continues to rise.

Currently, the revision of Law no. 22/2001 on oil and gas is still stuck in the Legislation Body. “If, we have completed, but stagnated in Baleg almost a year,” he said.

Kurtubi said the lack of strong legal umbrella that makes investors hesitate to invest in Indonesia. According to him, the government can issue a Law Enforcement Regulation (Perppu) to speed up the revision of the legal umbrella.

“In addition, the issue of licensing and tax levy in the exploration period became another problem that made oil and gas investment not too stretched.”

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