Domestic Gas Utilization Exceeds Target, Says Director General about Performance of Oil and Gas Subsector in Q3 2021

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MINISTRY OF ENERGY AND MINERAL RE SOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 378.Pers/04/SJI/2021

Date: 25 October 2021

Domestic Gas Utilization Exceeds Target, Says Director General about Performance of Oil and Gas Subsector in Q3 2021

At the Indonesian Oil and Gas Work Areas Auction Round I, 6 work areas were tendered out, while at Round II of 2021 which we plan to hold in Q4, there will be 8 work areas on offer and these areas are being evaluated, Director General of Oil and Gas of the Indonesian Ministry of Energy and Mineral Resources (EMR), Tutuka Ariadji, has said in a press conference titled "Performance of the Oil and Gas Subsector in Q3", held on Monday (25/10). To increase appetite for oil and gas work areas, the government has continued to improve the terms & conditions of production sharing contracts, continued Tutuka.

According to Tutuka, the improvements include flexibility in the form of contracts in accordance with Regulation Minister of EMR Number 12 of 2020 and a higher split for contractors. For oil production, the split is 80:20 if a work area has very low geological, infrastructure, and resource risks, and up to 55:45 if a work area is categorized as very high risk. For gas production, the split is between 75:25 for very low risk and 50:50 for very high risk.

Regarding the use of domestic gas, realization until Q3 hit 65.91%, slightly over the 65% target. The use of natural gas for domestic needs will continuously be increased to support the growth of the domestic industry.

In respect of oil and gas lifting, a component in calculating the amount of state revenue, oil lifting touched 661 MBOPD and gas lifting hit 1003 MBOEPD until Q3, while the ICP was averaged at US$65.17 per barrel.

Efforts to increase oil and gas lifting will be continued through, among others, optimized production of existing fields, accelerating the transformation of resources to production by accelerating POD for new fields and developing pending fields, optimizing incentives, and monetizing undeveloped discovery.

Other efforts include the implementation of Enhanced Oil Recovery (EOR) in potential fields, increasing the national oil and gas reserves and production through exploration activities--including the implementation of firm commitments to find new prospects and leads. "In addition, we also speed up licensing process and improve coordination with relevant agencies to accelerate the resolution of operational problems," Tutuka explained.

In terms of state revenues from the oil and gas subsector, the natural resources non-tax state revenue (PNBP SDA) reached Rp62.03 trillion, or 82.72% of the US$74.99 trillion target. This was attributable to the increase in ICP or the improvement in the world's oil prices. Meanwhile, the functional PNBP clocked up Rp107.91 billion, above the Rp91.15 billion target, and the oil and gas income tax (PPh Migas) touched Rp19.86 trillion.

Oil and gas investment until Q3 2021 was US$9.07 billion or 56.67% of the 2021 target. One of the challenges to oil and gas investment is the change in downstream investment, especially related to cost efficiency of Refinery Development Master Plan (RDMP) and Grass Root Refinery (GRR) programs. The Directorate General of Oil and Gas will coordinate with the relevant parties to encourage the achievement of investment targets.

Director General of Oil and Gas also stated that the policy of adjusting gas prices for certain industries and electricity would continue. The policy has supported 7 industry sectors, for example, it has increased the production and sales amount of the fertilizer industry by 7.79%, and lifted the production and export sales of the petrochemical industry of about 40,000 metric tons in 2020.

"This policy has played a role in the plan to increase investment by Rp191.08 trillion during the period 2021-2025 in the 7 industry sectors," added Tutuka.

As for oil and gas infrastructure, the government has made efforts to provide access to energy which can directly benefit the community. For example, the government plans to install 126,276 household gas connections in 21 regencies/cities, and the project has progressed by 86%. Additionally, the government distributed 3,448 converter kit packages for farmers at 15 regencies/cities to support economic recovery.

Touching on oil fuels and Mandatory B30, the import realization of Solar diesel in the period January-September 2021 was 1.85 million KL, or decreasing by 18% compared to the same period in 2020. The amount of Certain Oil Fuel Types (JBT), Special Assignment Fuel Type (JBKP), and General Fuel Types (JBU) in the period Q1-Q3 2021 increased by 3.19% compared to the same period in 2020. Meanwhile, the B30 realization in January-September 2021 was 22.01 million KL, increasing by 4.21% over the same period in 2020 with a potential saving of US$2.97 billion.

To improve the reliability of the oil and gas industry, especially in downstream business activities, the Directorate General of Oil and Gas has issued 29 processing business permits, 167 storage business permits, 2,101 transportation business permits, and 208 trading business permits.

Moreover, the budget realization until Q3 reached 52.53%, with the realization of gas network construction of 86.95%. This is due to the fact that most of the budget of the Directorate General of Oil and Gas is allocated for infrastructure construction which will be absorbed massively at the end of the year, that is, payments will be made after the equipment has been installed and tested.

Improvement in budget performance will continue to be carried out in a targeted and accountable manner. (IY)

Head of Bureau of Communication, Public Information Services, and Cooperation

Agung Pribadi (08112213555)