Indonesia Tackles Falling Oil Output with $200B New Investment Plan

Indonesia Tackles Falling Oil Output with $200B New Investment Plan

Indonesia is ambitiously planning to bring in $200 billion in new oil
investment as local production declines and demand grows. As part of the
plan, Bloomberg reports, Jakarta will allow foreign energy companies to bid
for 14 oil and gas blocks, all untapped, sweetening the deal with incentives
such as tax-free imports of equipment and technology.

Indonesia is currently producing some 800,000 barrels of crude daily - about
half of what it consumes - but this is expected to climb to over 1 million
bpd, to reduce the country's dependence on imports, which this month are
estimated to have reached 8.4 million barrels. Over the first quarter,
Indonesia's average monthly import rate was 10.55 million barrels.

Indonesia, like China, has been suffering from the depletion of domestic
fields as well as from insufficient investments over the last few years. As
a result, state-owned energy major Pertamina is looking for production
boosts abroad.

Since 2014, the company has grown its overseas production capacity to
150,000 barrels of oil equivalent daily through acquisitions and
partnerships. The latest acquisition, of French energy company Maurel &
Prom, added 30,000 bpd to its capacity. To date, the company has exposure to
nine oil-producing countries, including Algeria, Iraq, Tanzania, and Nigeria
and is negotiating the acquisition of two oil fields in Russia.

Last year, Rosneft and Pertamina struck a preliminary deal for the
Indonesian company to buy into the Chayvo and Russkoye fields, but talks
have stalled, apparently, and the finalization of the acquisitions is
uncertain.

Pertamina is also interested in producing assets in Iran that hold combined
reserves in excess of 5 million barrels of crude. The company is already
engaged in feasibility studies at two of these fields, whose combined daily
production is 74,500 barrels of oil.

At the moment, Indonesia consumes some 1.6 million bpd of crude oil and
Pertamina produces 308,000 bpd of this. The company recently announced plans
to boost its output by 42 percent this year, up to 438,000 bpd, but this is
still well below what the country consumes, so external help would certainly
come in handy.

At the same time, as Indonesia's Energy and Mineral Resources Minister
Ignasius Jonan told Bloomberg, that both upstream and downstream are
important for the government, so efforts are also being directed at
expanding the country's refining capacity.

Here, Pertamina is working with Rosneft and Aramco. With Rosneft, the
Indonesian company will build the Tuban refinery, with a capacity of 300,000
bpd, with the Russian major planning to take a 45-percent interest in the
venture.

With Aramco, Pertamina signed a JV for the expansion of the country's
largest refinery, in Central Java, which will boost daily maximum runs from
348,000 barrels to 400,000 barrels. The foreign partner will again receive a
45-percent stake in the venture, which is valued at $5 billion.

Indonesia is one of OPEC's minor producers, which actually left the cartel
last November before the production cut deal was reached, because it
couldn't afford to cut its already low output. Indonesia is also one of the
countries where demand for crude substantially exceeds output. The global
drive to reduce dependence on oil imports despite much more affordable
prices has evidently not passed it by and we will be hearing more from
Jakarta in the coming months and years.

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Link to Original Article:
https://finance.yahoo.com/news/indonesia-tackles-falling-oil-output-15000058
0.html

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com