Indonesia’s Upstream Sector in ‘Dire’ Need of Additional Investment

Indonesia’s ‘embattled’ exploration and production sector is in ‘dire’ need of additional investment, according to BMI Research.

The country is suffering from slowing exploration, rising costs from mature assets and a ‘seemingly perpetual decline’ in oil and gas output, energy analysts at BMI said in a brief report, which forecasted a steady drop in Indonesia’s oil and gas production to 2026.

“Once the world’s largest exporter of LNG, the country is anticipated to start importing LNG for the first time from 2021, as declining production fails to keep pace with demand,” the report states.

Although acknowledging that Jakarta has pursued various measures to generate greater interest in its upstream sector, analysts at BMI highlighted the need for more significant above ground improvements, particularly in its ‘notoriously complex and opaque regulatory and licensing environment’.

The analysts said these changes need to be made before the country can compete with ‘lower-risk’ markets in Asia, Europe and North America, as well as with some of the higher-risk and more frontier plays in Africa and Latin America.

“Despite holding one of the biggest undeveloped oil and gas reserves in the region, and boasting access to a large, growing consumer base, Indonesia remains a high-risk investment destination with limited returns,” the report said.