Indonesian energy deregulation vow draws global giants
JAKARTA: Global oil and gas giants appear to be taking a renewed interest in Indonesia's upstream oil and gas sector amid the government's push for energy security and promise of deregulation.
Putra Adhiguna, managing director at the Energy Shift Institute, told The Jakarta Post on Friday (May 23) that some increase in upstream oil and gas investment had been observed in South-East Asia, driven partly by declining domestic gas production and the looming risk of higher liquefied natural gas (LNG) imports.
In Indonesia, this trend is reflected in the anticipated return of major players like Shell, Chevron and TotalEnergies. South Korea's Daewoo Engineering & Construction (ENC) is also reportedly looking to invest around US$1 billion across various industries, including oil and gas.
'The region is responding to the pressure of falling output and rising demand, which could make reliance on imported LNG a costly and risky proposition,' said Putra. The country has been struggling to increase domestic production of ready-to-sell oil and gas, also known as lifting, despite its importance in achieving energy security and self-sufficiency, as envisioned by multiple administrations to cut costly energy imports.
This was partly due to aging fields, limited new discoveries, regulatory uncertainties and infrastructure constraints that have hindered production growth in spite of ongoing efforts.
During the International Petroleum Association Convention & Exhibition (IPA Convex) on Wednesday, President Prabowo Subianto personally asked his aides to simplify upstream regulations to boost oil and gas output, followed by a threat that he would remove officials who refused to do so.
'It remains to be seen how the President's call for regulatory simplification will translate into action in a sector where clarity and consistency are critical for long-term investment,' Putra said.
For nearly a decade, authorities have been formulating clearer and more competitive tax incentives in the oil and gas sector, most notably since the gross split production sharing contract was introduced in 2017.
The gross split scheme initially drew criticism for its complexity and unclear tax terms, which dampened investor interest, so the government began revising the framework. In September 2023, the Energy and Mineral Resources Ministry announced it was finalising an updated tax regulation to boost competitiveness and attract upstream investment, but no revision has been introduced since.
Amid renewed urgency, upstream oil and gas regulator SKK Migas stated on May 20 that the tax revision would be completed 'soon', with SKK Migas head Djoko Siswanto saying that United States oil major Chevron was interested in exploring and developing sizable oil and gas reserves in Indonesia.
According to Djoko, Chevron was seeking to develop blocks with potential reserves of 15 trillion cubic feet (425 billion cubic metres) of gas. He added that the company was in the early exploration stage of evaluating several identified assets, and that the government planned offer blocks in Bali or other eastern regions.
He also said around 25 other oil and gas companies had shown interest in investing in the upstream oil and gas sector, some of which had completed joint studies and were preparing to move forward to the next stage.
Chevron's Asia-Pacific exploration arm said it engaged regularly with SKK Migas, but according to spokesperson Cameron Van Ast, it was unable to disclose any related details in line with its long-standing policy, Reuters reported on May 20.
IPA president Carole Gall said given Indonesia's potential, she was 'not surprised' to see an uptrend in oil and gas investments. 'The collaboration between the government and industry over the past few years has been excellent, and that helps,' she told a press briefing on May 14 during IPA Convex in Jakarta, about global energy companies' reportedly renewed interest in the country.
Gall added that the major challenge for 2025 was strategy on maximising oil and gas output to strengthen the energy resilience. 'Given that upstream investments are long-term by nature, increasing output isn't something that can happen overnight. The focus, therefore, isn't just on boosting near-term production, but on ensuring the country reaches the right production levels in the years ahead,' she said.
Prateek Pandey, head of APAC oil and gas research at Rystad Energy, said on Saturday that the recent re-engagement of key oil and gas companies signaled a promising future in the sector. While near-term investments are expected to be modest, as they will still be in the exploration phase, the long-term potential will be significant.
This year could see South-East Asia welcome the highest number of final investment decisions on gas projects in a decade for a potential increase in output of 18 per cent, according to a report published on April 29 by US-based nonprofit Global Energy Monitor (GEM). According to the report, 2025 could see as many as 13 new gas projects financed in the region: five projects in Indonesia, two in Malaysia, four in Vietnam, one in Brunei and one in Myanmar.
Annual production capacity could expand by more than 20 billion cbm if all projects were approved, GEM said, signaling a strategic regional pivot toward accelerating gas development. It noted, however, 'These FIDs have faced a history of delays, so the likelihood of these projects moving forward remains unclear.' - The Jakarta Post/ANN
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