Pri Agung Rakhmanto:
Dosen FTKE Universitas Trisakti, Pendiri ReforMiner Institute
KOMPAS:11 May 2016
It is true that we must not fully depend on oil and gas, either as a source of state revenueor to fulfill energy demands. However, this does not mean that, when the production and proven reserves, especially of oil, continuously decrease, we can just keep quiet and see this as business as usual.
Oversimplified thinking that says that, as unrenewable resources, it is natural that the proven reserves of oil and gas will continue to deplete and we should not do anything about, it is not only misguided, but on certain levels indicates laziness.
There are many examples of countries that have been able to significantly increase their oil and gas production or proven reserves, even after periods of depletion. If the US, whichalmost doubled its oil production from around 7.2 million barrels per day in 2004 to 11.7 million barrels per day in 2014 and increased its proven reserves from 29.3 billion barrels to 48.5 billion barrels in the same period, can not be seen as a point of reference as it is too phenomenal and cannot be compared with us, then Brazil may be a good example.
The South American country increases its proven oil reserve from 11.2 billion barrels in 2004 to 16.2 billion barrels at the end of 2014. In the same period, its production also increased from 1.5 million barrels per day to 2.4 million barrels per day.
Still in the same period, China, a country not known for its oil production, increased both its production and its proven reserves, respectively from 3.6 million barrels per day to 4.1 million barrels per day and from 15.5 billion barrels to 18.5 billion barrels. Meanwhile, our oil production continues to decrease from 1.7 million barrels per day in 1995 to currently 800,000 barrels per day, and our proven reserves have decreased from 9 billion barrels to currently 3.7 billion barrels.
Does this mean that our oil resourcesare reduced and more limited? Nominally, compared with the countries mentioned above, our proven oil reserves may be lesser. However, relatively, the potential reserves that we own and have already identified cannot be described as low.
In late 2015, the Energy and Mineral Resources Ministry through the National Exploration Committee said that it had identified additional proven reserves potentials of 2.7 billion barrels of oil and 14 trillion cubic feet (TCF) of gas. The additional oil reserves reach 72 percent of the total proven reserves that we have right now. As for the additional gas reserves, the figure is more or less equal to the proven gas reserves in the Masela Block that we “argued about” recently.
If followed up thoroughly through a series of policies and concrete investments in exploration and production, the additional oil and gas reserves can bring us back to the levels we enjoyed in 1994-1996. In terms of production, this new finding may potentially bring us above the level of 1 million barrels per day once more. This is not to mention the around 60 sedimentary basins that Indonesia has that have been identified to contain oil and gas hydrocarbon.
From this figure, only 38 have been explored and the rest remain untouched. Of the explored 38 basins, oil and gas have been found in 16 and production has begun in nine. With serious efforts in the form of massive investments in exploration and production, it is not impossible for Indonesia’s oil and gas upstream industries to return to its peak production level of 1.65 million barrels per day, as in 1977 and 1995.
Needs President’s attention
How to realize this? The key is in the president. If the President sees the decreasing oil and gas reserves and production as something natural, in the future we will only see these decreases continue. Our oil imports will continue to go up. We will become an underestimated OPEC member, seen as nothing more than an appendage that is required solely because we are the biggest consumer market in Southeast Asia.
KOMPAS/GREGORIUS MAGNUS FINESSOTHE RESIDUAL FLUID CATALYTIC CRACKER (RFCC) FACILITY AT STATE-OWNED OIL COMPANY PERTAMINA’S PROCESSING UNIT IV IN CILACAP, CENTRAL JAVA. THE RFCC FACILITY HAS A DAILY CAPACITY OF PROCESSING 62,000 BARRELS OF CRUDE OIL INTO GASOLINE WITH AN OCTANE CONTENT ABOVE 93.
Without any intention to oversimplify the problem and underestimate other players, I have arrived at my one conclusion: The renaissance of our national oil and gas upstream industry will only happen if President Joko Widodo is willing to provide extra attention to the upstream industries by taking concrete action.
The issues and problems that have so far obstructed the development of our national oil and gas upstream industries are multi-sectoral and spread across many governmental levels. They are complex and their solutions may not be linear. To tackle them effectively, state officials at the levels of ministers or coordinating ministers are no longer sufficient.
In an atmosphere filled with uncertain regulations due to the weak Oil and Gas Law (Law No. 22/2001), of which the majority of articles have been annulled by the Constitutional Court, for example, the progressive resolution needs the president to be directly involved in issuing governmental regulations in lieu of laws.
In terms of land acquisition and licensing, presidential instructions or regulationsare needed to provide special treatments that will smoothen exploration and production. Similarly in other issues related to fiscal aspects, taxation, import duties, and export-import, a clearer policy guideline from the President is needed to coordinate the different sectoral interests.
In my observation thus far, apart from clear resolution guidelines in the management of the Mahakam and Masela blocks, I see that crucial issues and problems in the oil and gas upstream sector have yet to be prioritized and obtain direct, special attention from President Jokowi.
This is, in fact, expected, considering the complexity of other issues and problems the country is facing right now. However, we need to remind ourselves that, based on projections, even in 2050 oil and gas will still play a dominant role as a primary source of energy both nationally and worldwide, even if new and renewable resources will continue to be developed.
Therefore, there is a very fundamental reason for the government, especially President Jokowi, to start providing more attention and directly lead the resolution of problems in the national oil and gas upstream industry. Furthermore, currently the national oil and gas upstream industry is in survival mode because of the low oil prices. It is not too late, Pak Jokowi.