News / Asia

Indonesia Energy Producers See Natural Gas as the Future

Indonesia's energy sector is at a crossroads.  Oil production is on the decline.  New exploration is needed to develop new wells.  The country has huge natural gas reserves, but it will also require the drilling of wells, pipelines and other infrastructure to develop them.  Energy industry officials says Indonesia needs foreign investment to increase energy production but that confusing regulations and corruption have made companies question whether the investing in Indonesia is worth the risk.

Indonesia produces more than a one million barrels of oil a day while it consumes 1.5 million, making it a net oil importer.  And, oil production has been declining the last few years.  The majority of the existing oil wells are mature wells, which means most of the oil has been extracted. Significant oil reserves still exist in areas more than 200 meters beneath the surface of the sea.  Drilling at these depths would would be an very expensive undertaking.  

Energy analyst William Deertz recently surveyed a number of energy producers about the investment and regulatory climate in Indonesia.  He says the government had made it more difficult for private companies to invest in developing these new fields.

"Production has been declining for the last decade.  That's a fact.  And you have to ask yourself, 'Why is that?'  Because as you see in the survey results, investors are very keen on the geological prospectively for Indonesia," said Deertz.  "So you are sitting there [thinking], well if you have the resources, why are we [not] seeing the investment and seeing an increase in production?  You really have to start to question that."

Deertz says oil companies still see great potential in Indonesia's oil reserves but confusing government regulations, conflicting oversight from national, regional and local authorities and corruption are making them wonder if the investment is worth the risk.

"The sector is still regarded as attractive, but I guess some of the shine has come off," he said.  "There are a lot of people that are starting to question it.  And we did ask in the survey, has your company ever considered leaving Indonesia, for the various reasons, the challenges?  And it was upwards to almost a third of the participants said, 'Yeah, we have considered leaving.'"

Energy companies are even more concerned about natural gas exploration and development.  Indonesia has the 12th largest natural gas reserves in the world. And only one third of the more than 60 identified natural gas basins have been explored.  

Ron Aston, president of the Indonesian Petroleum Association says energy companies are already investing more than $1 billion in gas exploration.  But he says, gas requires massive pipelines and facilities to convert it into LNG or liquefied natural gas, to export it.

"Gas is a different story.  It's a different game.  For one thing you have to get the gas to the market.  If you find oil you can pull up a truck, or pull up a tanker and sort of suck it up and take it away," said Aston.  "If you find gas, you got to build the infrastructure to commercial[ize] that.  That is either pipelines for LNG receiving facilities.  You've got to invest heavily in order to achieve.  And with that you need a long term economic return.  You've got to have surety of contract for 20 years or more to get the return from that gas."

While Aston says investors see the current political and economic climate in Indonesia as stable, the energy industry wants to see more clarity in government regulations and reassurance that their contracts will be honored.

You May Like

Russia Names US NGO 'Undesirable'

Prosecutors determine activities of National Endowment for Democracy to be 'undesirable,' paving the way for it to be outlawed on Russian territory More

Erdogan Vows 'Anti-Terror' Campaign in Syria, Iraq

Erdogan expressed confidence the 'necessary steps' will be taken by NATO leaders, who will meet Tuesday at Turkey's request More

North Korea: 'No Interest at All' in Nuke Deal

Senior US envoy Sydney Seiler visits Beijing Tuesday for talks on how to revive the stalled six-party nuclear talks with North Korea More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Calls Fight Against Human Trafficking a Must Wini
X
July 28, 2015 12:21 AM
The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video Iran Nuclear Pact Wins Few New US Congressional Backers

Later this week, President Barack Obama returns from a trip to Africa to confront a U.S. Congress roiled by the nuclear accord with Iran, an agreement that has received the blessing of the U.N. Security Council. Days of intensive lobbying and testimony by top administration officials have won few new congressional supporters of the pact. VOA’s Michael Bowman reports.
Video

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.
Video

Video Obama Encourages Kenya to Fix Cultures of Corruption, Discrimination

President Barack Obama bid farewell to Kenya Sunday with a major speech at as stadium outside the capital Nairobi where he called on Kenyans to change the cultures of corruption and discrimination that can hold society back. VOA East Africa Correspondent Gabe Joselow has the story.
Video

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.
Video

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.
Video

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.
Video

Video Racially Diverse Spider-Man Takes Center Stage

Whether it’s in a comic book or on the big screen, fans have always known the man behind the Spider-Man mask as Peter Parker. But that is changing, at least in the comic book world. Marvel Comics announced that a character called Miles Morales will replace Peter Parker as Spider-Man in a new comic book series. He is half Latino, half African American, and he is quite popular among comic book fans. Correspondent Elizabeth Lee reports from Los Angeles.
Video

Video California Towns Welcome Special Olympics Athletes

Cities and towns in Southern California are greeting thousands of athletes who are arriving for Special Olympics, a competition for people with intellectual disabilities. The games will run from July 25th through August 2nd. VOA's Mike O'Sullivan reports from Pasadena, California, where athletes from Namibia, Singapore and Tanzania got a rousing welcome from local residents.
Video

Video Critics of Japan Defense Policy Focus on Okinawa

In Okinawa, many locals have long complained that Tokyo places an unfair burden on the tiny island by locating most of Japan's U.S. military bases there. As Japan's government moves toward strengthening and expanding the country's defense policies, opponents of those plans are joining local protesters in Okinawa, voicing concern about where the country is headed. VOA’s Brian Padden reports from Okinawa.
Video

Video IS Uses Chemical Weapons in Syrian Attack

Islamic State militants have added a new weapon in their arsenal of fear: chemical weapons. VOA Kurdish service reporter Zana Omer was on the scene within hours of a recent attack in Hasakah, Syria, and has details of the subsequent investigation, in this report narrated by Miguel Amaya.
Video

Video Historic Symbol Is Theme of Vibrant New Show

A new exhibit in Washington is paying tribute to the American flag with a wide and eclectic selection of artwork that uses the historic symbol as its central theme. VOA’s Julie Taboh was at the DC Chamber of Commerce for the show’s opening.
Video

Video Hoverbike Flying Toward Reality

Another long-standing dream of many technological inventors is quickly approaching reality: U.S.- and British-based firms are cooperating in the development of an individual flying platform they call a hoverbike. They say it may revolutionize the concept of flying, including in the U.S. military. VOA’s George Putic reports.
Video

Video As Japan Expands Defense Role, Protests Follow

The Japanese government is moving forward with a controversial security bill that would authorize the military to fight abroad for the first time since World War II. Leaders say it is critical to defend against rising threats from China and North Korea. VOA’s Brian Padden reports from Japan on the big changes ahead, and the opposition they are drawing.
Video

Video Replacing Poppies with Coffee in Myanmar

The remote mountains of Myanmar’s Shan state are home to the second-largest opium-producing region in the world. After a drop during the 2000s, production surged in the past eight years to feed an increasing demand for heroin in China. But farmers are now making less on the crop, and the U.N. is hoping many will make the switch to growing coffee. Daniel de Carteret reports for VOA from Taunggyi.

VOA Blogs