Indonesian government is finalising the process to create holding companies for state firms in oil and gas, mining, financial services and food sectors.
The government is looking to revise Government Regulation (PP) No. 44 to include new articles on state asset management in favor of the establishment of the super holding, reported Jakarta Post, a local newspaper.
“We are discussing the regulations needed over the whole process to ensure that the state will remain the manager of the future state-owned enterprise [holding company],” State-Owned Enterprises (SOEs) Minister Rini Soemarno said on Thursday.
Pertamina will be the holding company in the oil and gas sector. It is likely to acquire state-run gas firm PGN as its subsidiary, Soemarno said. PGN will later be expected to acquire Pertamina’s subsidiary Pertamina Gas (Pertagas) in order to prevent any possible overlaps in work areas.
The government expects that the future energy holding company will increase efficiency and eliminate duplications of investment between state-run energy firms.
After the forming of the energy holding company, Pertamina’s total investment until 2021 is expected to reach $1.5 billion, so that infrastructure for gas supply can be developed faster, the newspaper quoted a company official as saying.
Govt Confirms East Ambalat Contract Transfer to Pertamina
The government has handed over the contract for East Ambalat's oil and gas block to Pertamina, a move expected to boost the state-owned energy company's oil and gas production for the next three decades, Sudirman Said, Minister of Energy and Mineral Resources, said on Wednesday (25/05).
Pertamina Hulu Energi Ambalat Timur, a subsidiary of Pertamina, will be responsible for developing the East Ambalat oil and gas block, located in the Ambalat Sea off Tarakan, North Kalimantan, in border areas between Indonesia and Malaysia.
US energy giant Chevron had relinquished the contract for the block previously, saying that Malaysia's claim over the border areas had increased tension between the two neighboring countries and made the block riskier to explore.
Wianda Pusponegoro, Pertamina's vice president of corporate communications, said Pertamina Hulu Energy will own the East Ambalat block outright. The East Ambalat Production Sharing Contract (PSC) will be valid for 30 years, with production in the first three years estimated to be worth $8.5 million.
Owning and operating the East Ambalat block will also boost Pertamina's contribution to national oil and gas production. Currently, the company contributes only around 26 percent of the total national oil and gas production.
The block lies 80 kilometers east of Tarakan at a depth of 2,000 meters, and covers a total area of 4,735 square kilometers. It is capable of producing as much as 40,000 barrels of oil per day.
The government also awarded a contract for the MNK Central Bangkanai block in Central Kalimantan to Indonesian coal mining company Adaro Energy.
The awarding of the new contracts is part of the government's effort to boost oil and gas production from the country's 21.5 billion barrels of oil reserves which, due to their scattered locations in remote or hardly accessible places, become uneconomical to exploit amid declining global oil prices.
“We awarded fewer contracts this year, but we're still optimistic,” Sudirman told reporters at the 40th Indonesian Petroleum Association Convention and Exhibition 2016 in Jakarta.
Darmin Nasution, the Coordinating Minister for Economic Affairs, said earlier the government may modify the terms of its existing oil and gas contracts to attract more companies to invest in the country's oil and gas production.
The top oil producing countries, that together account for nearly 45 percent of total global crude oil production, are the United States, Saudi Arabia, Russia, and China.
World's Top Oil Producing Countries in 2015:
1. USA 12,704,000 bpd
2. Saudi Arabia 12,014,000 bpd
3. Russia 10,980,000 bpd
4. Canada 4,385,000 bpd
5. China 4,309,000 bpd
24. Indonesia 825,000 bpd
bpd = barrels per day
Source: BP Statistical Review of World Energy 2016
Although currently many countries are delving into the potential of renewable energy, the global importance of - and dependency on - oil cannot be denied, nor neglected. Fossil fuels will remain to be the most important sources of global primary energy, with oil accounting for 33 percent, coal for 28 percent and natural gas for 23 percent of the total (IMF: April 2011). Renewable sources only constitute a fraction of the total global primary energy supply (primary energy includes fossil fuels - oil, coal and natural gas -, nuclear energy and renewable energy - geothermal, hydropower, solar and wind).
Increased demand for crude oil in combination with supply-side concerns during the 2000s caused the oil price to reach historic highs. Although this rising trend was temporarily interrupted by the global financial crisis of 2008-2009, global oil demand rose substantially after 2009 (and thus the price rose accordingly), largely due to rising consumption levels of crude oil in those emerging and developing countries that show robust GDP growth. China accounts for a large share of the world's energy consumption and therefore affects world market prices for primary energy sources.
However, from mid-2014 global oil prices started to decline sharply on sluggish global economic activity (particularly due to rapidly falling economic growth in China as its government has been trying to shift the economy from export-oriented to become consumption-oriented) and an increase in US shale production, while the Organization of Petroleum Exporting Countries (OPEC) decided not to curb production rates. In February 2016 oil prices touched 13-year lows. After this recent low, prices somewhat started to recover.
Japan Bank for International Cooperation (JBIC) will be extending a loan of $1.2 billion to finance the Tangguh LNG expansion project.
JBIC inked a contract Thursday with a joint venture formed by partners including Mitsubishi Corp., Inpex and a member of the JX Holdings Group, JBIC said in a statement published on Tuesday.
Last week, BP and its partners approved the final investment decision (FDI) pertaining to expansion of Tangguh LNG project in Indonesia.
The expansion project will add a third LNG process train (Train 3) and 3.8 million tonne per annum (mtpa) of production capacity to the existing facility, bringing total plant capacity to 11.4 mtpa. The project also includes two offshore platforms, 13 new production wells, an expanded LNG loading facility, and supporting infrastructure, BP said on Friday.
About 75 percent of the Train 3 annual LNG production has been sold to the Indonesian state electricity company PT. PLN (Persero). The remaining volumes are under contract to Kansai Electric Power Company in Japan, the other foundation buyer for Train 3.
BP Berau Ltd and its affiliates in Indonesia hold a 37.16 percent interest in the project. Other Tangguh production sharing contract partners are MI Berau B.V. (16.30 percent), CNOOC Muturi Ltd. (13.90 percent), Nippon Oil Exploration (Berau), Ltd. (12.23 percent), KG Berau Petroleum Ltd and KG Wiriagar Petroleum Ltd (10 percent), Indonesia Natural Gas Resources Muturi Inc. (7.35 percent), and Talisman Wiriagar Overseas Ltd. (3.06 percent).
Indonesia will offer 14 oil and gas blocks for bidding, according Energy Ministry's director general of oil and gas said in Jakarta Monday.
Most of the blocks are located in the eastern part of Indonesia.
"We are offering a new scheme," Tempo, a local news outlet, quoted I Gusti Nyoman Wiratmaja as saying.
The work areas offered through regular auctions are South CPP, Suramana I, South East Mandar, and North Arguni. The Ministry is also offering direct exploration in the West Hill Block, Batu Gajah Dua Block, Kasongan Sampit Block, as well as Ampuh, Ebuny, Onin, and West Kaimana blocks.
Bungamas and Raja coal bed methane concessions will also be up for auction in addition to Batu Ampar shale gas area.
Under the new scheme, the government is offering investors to manage the working areas using an open bid split scheme based on contractors' proposals. For non-conventional work areas, contractors can also get a sliding scale scheme, whereas the amount is calculated based on daily production.
Seven work areas are being offered directly to companies and the rest is offered through open biddings. Investors can access the bidding documents starting from July 18 until August 22, 2016. The regular auction is open until October 28, 2016.
The ministry is also preparing six new working areas for the second phase auctions.