2023 is a year full of challenges for the Indonesian upstream oil and gas sector. Several projects that have not yet been completed are expected to complete the work target in 2023. Because, if not, it will certainly slow down even more because the 2024 election year is a reason for uncertainty in terms of rules and policies.
The upstream oil and gas projects that are still on the queue for execution include: the Masela Gas Project; IDD (Indonesia Deep-water Development) Project; Natuna; Andaman (Aceh); Tangguh (Papua); Agung (North Bali); Seram; Timor; Rokan CEOR (Chemical Enhanced Oil Recovery); Buton Asphalt; Aru; Warim Papua; and others.
In addition, the alignment between gas infrastructure development and domestic gas needs is still a challenge in building connectivity between the upstream, midstream and downstream sectors. The integration of the goals and targets set out in the road map for the development of the downstream oil and gas industry which requires gas as raw materials and fuel, as well as electrification originating from gas and renewable energy must be synchronized nationally. Especially for the LNG infrastructures, not only the developing additional train (Tangguh case), but also building the regasification, LNG bunkering, and utilizing the declining LNG Plant production (Badak case) as an LNG Hub.
Decentralization, decarbonization and digitalization as trends in energy management in the future must also be a clear agenda set out in the RUEN (National Energy General Plan) which has gone through the verification of the National Energy Council (DEN).
It is estimated that Indonesia’s oil and gas industry in 2023 will still be more stable compared to international conditions which were affected by the prolonged impact of the Ukrainian war.
Indonesia still has several potential oil and gas fields to be developed soon. The Abadi Field in the Masela Block, or several fields in the IDD Block in the Mahakam delta line into the deep sea, are examples of fields that have great potential and require serious development.
Meanwhile, the fields in the Rokan Block and Tangguh Field which already have certainty in terms of their oil and gas reserves, require accelerated execution so that the planned projects are OTOBOS (on time, on budget, and on scope). Exploitation drilling targets in the Rokan Block require a speed of evaluation and response to the results obtained. Because not only must be successful in achieving the number of wells drilled, but also the amount of production.
Apart from several oil and gas blocks that have been transferred to Pertamina, such as the Mahakam Block; Sanga-sanga Block; East Kalimantan Block; and the Rokan Block, an oil and gas block that still has the potential to increase production is the Cepu Block. There are still Kedung Keris, West Kedung Keris, Alas Tua, Alas Dara, Kemuning, and other fields.
The oil and gas exploration and development blocks that are being worked on include: the Andaman Block off the coast of Nangro Aceh Darussalam, as well as the Agung Block in northern Bali; Seram Block around Seram Island; Aru Block in deep sea near Bird’s Head, Papua; the Warim Block in Papua; and the largest asphalt deposit in Buton, Southeast Sulawesi.
Challenges and Opportunities
The government has asked for collaboration among various stakeholders in the upstream oil and gas industry. However, the fundamental thing that must be resolved first is operational problems and asset management strategies.
Some of the old fields managed by Pertamina certainly have challenges that are not only getting more difficult in increasing production, but also in field operation and maintenance in order to maintain production level for each field. Therefore, Pertamina has to focus on exploration activities that must be carried out more seriously by using the latest data and technology. It is time for geoscientists to use software applications that already involve artificial intelligence (Artificial Intelligent – AI). Likewise for reservoir, drilling and production engineering experts.
By having an integrated system to optimize production connected to the latest database in the Rokan Block, namely the IODSC (Integrated Optimization Decision Support Center), Pertamina is expected to be able to replicate this system to other assets. Thus, digitization in the upstream oil and gas sector will run well and have a significant impact. Not only has an impact on increased production but also reliability, data accuracy, and guaranteed sustainability.
Moreover, SKKMigas itself has built an IOC (Integrated Operation Center) which can monitor operational activities in upstream oil and gas companies throughout Indonesia. This is a system that supports each other in building the digitization of Indonesia’s upstream oil and gas sector.
Another challenge is the need to restore or decommission old fields which are already very marginal and must be abandoned, so that they can be returned to their original environment. This is a tough challenge that touches on the operational side and funding. And, this must be the concern and collaboration of all stakeholders. Do not let after exploiting the non-renewable mineral resources, we leave a bad environment for future generations. Remember, “we borrow nature from our children and grandchildren, this nature is not inherited from our ancestors.”
The challenges in new working areas, such as the Masela Block, Andaman Block, IDD, and others, are the need for speed and accuracy in bureaucratic decisions supported by knowledge and experience in developing and managing oil and gas blocks.
There must also be an understanding from users of oil and gas products that price adjustments are acceptable under certain conditions. Because with decreasing production and increasing operating and maintenance costs, of course, this will cause the economic value to run low. Therefore it is necessary to adopt a “win-win” policy so that there is harmony in the development of the upstream, midstream and downstream oil and gas industries.
With these various challenges, of course there are many opportunities that can be pursued, including: optimizing production that can be monitored in real-time using digital technologies; use of databases and artificial intelligence to aid decision making; development of new fields and marginal fields that are more based on concern for the environment; construction of oil and gas infrastructure (midstream) that is aligned between prospects in the upstream sector and prospects for users in the downstream sector; and development of a massive downstream industries.
It is time for infrastructure development that connects upstream oil and gas production and the interests of users (off-takers) to be aligned again with current conditions. Reserves and production that have declined in marginal fields with decades of production must be re-evaluated and distinguished from areas that still have reserves and production that may increase. If it concerns a gas field, it has to be considered and thought about how to transport the gas, the development scenarios, the contracts (Sale-Purchase Agreement) and so on.
Another thing that must be on the collaboration agenda between stakeholders is the alignment between the development of New and Renewable Energy (NRE) and optimizing non-renewable energy, like coal, oil and gas production. As much as possible oil and gas can still be utilized no longer as fuel but as a raw material (feed stock) for the massive petrochemical industry. Energy saving management has to be a first prioritizing policy.
Thus, an electric company, for example, which has been a user of natural gas, in addition to coal, can carry out decentralization, decarbonization and digitalization in an integrated manner with users of motor vehicles (transportation); households; and industry.
The development of the downstream (petrochemical) industries will also increase significantly along with more competitive and certain oil and gas prices. It’s because of the alignment of the interests of the upstream – downstream oil and gas industry.***
*Salis S. Aprilian, Ph.D., energy observer and founder and CEO of Digital Energy Asia.