Energy Ministry Calls For Investment in Deep Sea Exploration

Oleh Anggita Rezki Amelia 30 May 2016

"Let's move into deep water. This fits the concept that our nation is a maritime country, which is the vision of our President."

Penutupan Konvensi IPA 2016

Director General of Oil and Gas at the Ministry of Energy and Mineral Resources I.G.N. Wiratmaja Puja closed the 40th Indonesian Petroleum Association (IPA) Convex by urging the oil and gas industry to move quickly to explore the potential in Eastern Indonesia.

"Let's move into deep water. This fits the concept that our nation is a maritime country, which is the vision of our President," he said at the closing session of the 40th IPA Convex at the Jakarta Convention Center, Jakarta, Friday (27/5). (Read: Largest Ever IPA Convention Focuses on Low Oil Prices).

Wirat said that the full extent of Indonesia’s deep sea potential is not known because there has been so little exploration activity. As a result, compared with the interest in deepwater potential in countries such as in Mexico and in the North Sea, there has been very little interest in Indonesia’s deepwater potential.

However, the internal rate of return (IRR) of deep-sea blocks in Indonesia is still below 20 percent. "If I’m not mistaken, (an IRR of) over 20 percent is an attractive (proposition)," he said. (Read: Paradigm Shifts, Oil and Gas Sector Expected to Drive Economy).

Two major topics were discussed at the three-day event, which is the largest in the oil and gas sector. First was fiscal policy flexibility to make the oil and gas industry more attractive. Second was the paradigm shift in the oil and gas industry, whereby energy has become the major driver of the economy that has a multiplier effect on the people. 

The government is currently preparing incentives to make oil and gas investment in deepwater more competitive. One of these initiatives is extending the deep sea exploration phase. Contractors are normally given a maximum of 10 years for exploration. This will be increased to 15 years at most. (Read: Government Prepares New Design for Upstream Oil and Gas Management).

Another incentive is to offer larger revenue shares to contractors operating in deep-sea oil and gas blocks. Many oil and gas investors have complained about the revenue sharing in Indonesia, which makes the country’s oil and gas business less attractive.

In a study by Wood Mackenzie, Indonesia ranked second out of ten countries for the largest government oil and gas revenue share. The Indonesian government has an 81 percent share, which is one percent higher than in Malaysia, and four percent higher than in Norway. 

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