Robert Chambers, Head of Upstream, Holt Energy Advisors

In the first of two articles looking at the upstream business in Indonesia, I will reflect on some of the major changes and activities we have seen this year, and consider some of the priorities and uncertainties going forward.

All change at the top

There is only one place to start really, and that is with the presidential elections. Joko Widodo (Jokowi) had hit the two-term limit, having been president since 2014. The elections were held in February, with Prabowo Subianto declared the winner in March 2024 and his inauguration coming in October. Jokowi backed Prabowo as his successor, going against the selection of his party's (PDIP) candidate Ganjar Pranowo.

As seems normal when there is a new president, we have subsequently seen changes at the top of both SKK Migas and Pertamina, with Simon Aloysius Mantiri appointed as the new CEO of Pertamina and Djoko Siswanto appointed as the new head of SKK Migas. We are likely to see further changes trickle down through these organizations, with the inevitable potential that decision making may slow down until the maneuvering and changes are complete.

For now at least, these changes do not seem to have changed the direction of the upstream industry, with energy security remaining a top priority and growing domestic oil and gas production remaining a key pillar of this. However, we have also seen a new longer-term vision presented that includes the phasing out of fossil fuels for power generation.

The outlined plans for growing domestic production include reactivating idle wells, enhancing output at producing assets, and cutting regulations to encourage investment, particularly in exploration.

Production

The Indonesian government has maintained their production targets for oil (1,000 Mbbl/day) and gas (12,000 MMscf/day) but have delayed the target date by two years to 2032. Despite the delay, these targets will still be tough to hit given that oil and gas production have been on a declining trend for a number of years. Oil production now sits around 576 Mbbl/day and gas lifting sits below 6,000 MMscf/d (the chart is shows net production so includes some volumes not included in the lifting value).

Indonesia Oil & Gas production, Source: MEMR

For gas production, there have been some increase in gas production over the last couple of years thanks to Tangguh train 3 coming onstream. Looking forward, there are a number of new projects lined up that should provide some growth by 2032, with Genting's AKM development having taken FID and Eni's Northern Hub development in the Kutei basin expected to take FID in 2025. In addition, we have seen FID of the UCC project at Tangguh LNG that should help to extend the plateau rate. We will then need to see the how things pan out at Abadi and the Andaman discoveries, although time is of the essence if are to come onstream in time to impact the 2032 targets.

Looking at oil production, it is a tougher picture due to the limited number of projects in the pipeline. Having said this, condensate from new gas projects will help to manage the decline. If we are to see a reversal of the declining trend, then we would need to see some significant new oil discoveries.

Fiscal term improvements?

In August, Indonesia enacted the new Gross Split PSC. However, to badly paraphrase The Who it was very much a case of “Meet the new terms, same as the old terms” with the changes limited to some tweaks to the base split and a reduction in the number of variable and progressive components used to calculate the final split. From what I can see, the changes did little to excite investors and I can't see many contractors opting for a Gross Split contract over the legacy Cost recovery terms when given the choice.

In addition to the above changes, we have also seen the KSO start to make a return. This contract type allows an existing operator to partner with a third party for technical assistance, with the partner typically being rewarded based on incremental production over an agreed baseline or for the performance of a ringfenced new development. The KSOs being offered have typically come from either Pertamina EP blocks or from blocks held by a company owned by the regional government (BUMD).

One thing that I would add, is that we seem to spend a lot time looking at fiscal term changes to drive investment. However, it is often the secondary regulations and terms that can have a bigger impact on the ease of doing business. These were covered nicely in this article by Larry Luckey: https://thediplomat.com/2024/12/why-indonesia-needs-to-reform-its-oil-and-gas-exploration-landscape/.

Expiring PSCs

From 2018 to 2023, we saw a large number of PSCs coming to expiry and the handling of this issue created a huge amount of uncertainty and disruption, with a large number of the expiring contracts handed over to Pertamina together with the implementation of Gross Split terms. We are now coming to another major wave of PSC expiries, with the table below showing the PSCs that are scheduled to expire from now to 2030 together with notes where extensions have been granted.

Indonesia - Expiring PSCs, Source: Own research

Lessons have certainly been learned from the first wave and the approach to this second wave seems to be gentler on the industry, with the expiring contracts generally extended to the existing partners under Cost Recovery terms. We have even seen some awards with more generous fiscal terms negotiated that should encourage investment.

That being said, there are still a large number of PSCs that need decisions made around their expiry, with MedcoEnergi (and partners) particularly exposed.

If some of these PSC aren't extended then it could open up opportunities. As an example, a nice opportunity will be created if Eni's Makassar Strait PSC isn't extended. There is currently late-life production here from the West Seno field and, with the facilities also handing production from Bangka field in the Rapak PSC, we could even see Bangka carved out of this PSC to create a more integrated and ring-fenced opportunity.

Bid rounds

Indonesia has consistently offered acreage through bid rounds in the last four years. There were two formal rounds in both 2021 and 2022, and three formal rounds in 2023.

• The 2021 rounds saw blocks awarded to a number of international companies, including BP, Husky (Cenovus) and Petronas Carigali as well a domestic companies such as Energi Mega Persada.
• The 2022 bid rounds saw further blocks awarded to international companies including Eni, POSCO (new entrant) and Conrad Asia Energy as well as a selection of local companies including Saka Energi.
• For 2023 rounds saw awards to MedcoEnergi, PETRONAS Carigali, TexCal Energy and a consortium of Bumi Armada and Pexco.

We have seen a further two bid rounds this year, with a total of 11 work areas offered across the two rounds.

Indonesia - Bid rounds

2024 - Round 1

The first round saw five block offered, with three of these seeing awards.

• Central Andaman: was awarded to Harbour Energy (60% + operator) and Mubadala Energy (40%). It contains two deepwater blocks located offshore Aceh, where the same companies have seen recent exploration success.
• Amanah: was awarded to MedcoEnergi (operator), Sele Raya, and KUFPEC. The block is located onshore south Sumatra.
• Melati: was awarded to Pertamina Hulu Energi (operator), Sinopec, and KUFPEC. The block is located onshore and offshore southeast Sulawesi.

The remaining two blocks offered: Pesut Mahakam and Panai were not awarded.

2024 - Round 2

The second round was launched in December and consists of six working areas

• Air Komering: located onshore South Sumatra, the block is offered under a regular tender with the option of cost recovery of gross split terms.
• Serpang: located Offshore East Java, the block is offered under a direct offer with cost recovery terms.
• Kojo: located offshore Makassar Strait, the block is offered under a direct offer with cost recovery terms.
• Binaiya: located Offshore Maluku, the block is offered under a direct offer with cost recovery terms.
• Gaea I: located Onshore & Offshore West Papua, the block is offered under a direct offer with cost recovery terms.
• Gaea II: located Onshore & Offshore West Papua, the block is offered under a direct offer with cost recovery terms.

We can expect awards from the second round to be announced towards the end of Q1 2025.

Exploration

After a bumper 2023, this was a quieter year for exploration. I won't cover all of the exploration wells but wanted to cover some of those related to international companies.

The first few are in Andaman, where following the successes at Timpan-1 (2022) and Layaran-1 (2023), we have seen further drilling in the are with Halwa and Gayo prospects (both Andaman II PSC) and the Tangkulo prospect (South Andaman PSC). The results were mixed, with Halwa-1 delivering low gas saturations and Gayo-1 delivering a small discovery. Tangkulo-1 was more successful, with a "significant discovery" announced. This will add the the existing discovered resources across the Andaman PSCs, with the next challenge being how to get them developed.

Moving the the Kutei basin, there were no new wildcats this year but Eni are likely to kick off a new drilling campaign in 2025, with up to six prospects lined up to be drilled. Three of these prospects are in the Muara Bakau PSC: Konta, Meriam, and South Meriam. The remaining three are in other blocks in the basin, namely North Konta in the West Ganal PSC, Lele in the Peri Mahakam PSC, and Tambak in the East Ganal PSC.

Onshore. we saw TexCal Energy drill the PC-01 exploration well in the Mahato PSC, which came up dry.

Priorities and updates on major projects

SKK Migas publish two project lists, the first being projects of national strategic interest and the second being strategic projects.

National strategic oil and gas projects

As of June, the national strategic project list has not changed since I looked at them last year, with the four projects shown below.

National Strategic Projects, Source: SKK Migas

I looked at these in detail last year, so wanted to provide a summary of any updates seen in 2024.

• Tangguh LNG: in November, FID was taken on the Ubadari, CCS, Compression (UCC) project. This will see the development of the Ubadari field as well as the construction of CCS and compression facilities. Investment in the project is reported to be US $7 billion, with the project having the potential to unlock around 3 Tscf of additional gas resource as well as sequestering around 15 MMte of CO2 in its initial phase. The project will not see increases in throughput but should allow the existing three LNG trains to operate at their capacity for longer.
• IDD & Geng North: in August, we saw the approval of two PODs. The first will see the integrated development of the Geng North and Gehem fields that will create a "Northern Hub" for the basin, and the second will see the development of the Gendalo & Gandang fields as tie-backs to the existing "Southern Hub" at the Jangkrik field. We are looking forward to FID being taken on these projects this year. There was also some talk of a potential third hub, but this would be dependent on future exploration success in the basin (see exploration section above).
• Asap, Kido, Merah (AKM): it has been a busy year for Genting at AKM. In June, Genting awarded a contract to Wison New Energies to construct a 1.2 mtpa floating liquefied natural gas (FLNG) unit. In August, they re-entered the Asap-4X and then in October the re-entered the Asap-2X well. October also saw further contract awards related to the onshore processing facilities and pipelines.
• Abadi Masela: focus has turned to the CCS elements of the project and there was some indication in the second bid round document that the FLNG option may be revisited.

Strategic oil and gas projects

In December 2023, there were five strategic oil and gas projects: AFCP, Banyu Urip Infill Clastic, Forel Bronang, Mako, and Hidayah. In June, an updated version of the strategic projects was presented with the majority of the previous projects now longer on the list. This is mostly due to these projects progressing, although one was also removed. Looking at the December 2023 list, these are the brief updates:

• Forel Bronang: new oil and gas field developments in the MedcoEnergi operated South Natuna Sea Blk B PSC. The onstream date is experiencing some delays due to the late delivery of the FPSO, which finally sailed away in October. Given this, I would expect the development to come onstream early this year.
• AFCP: an inlet compression project for the producing Anoa field in the Harbour Energy operated Natuna Sea Block A. I believe it came onstream mid-year.
• Banyu Urip Infill Clastic: an infill drilling campaign for the producing Banyu Urip oil field in the ExxonMobil operated Cepu PSC. The first wells of the project were drilled this year.
• Hidayah: development of the 2021 oil discovery in the PETRONAS Carigali operated North Madura II PSC. FID was taken on the project in January 2025.
• Mako: potential development of the Mako gas field in the Duyung PSC, operated by Conrad Asia Energy. This year saw some good news, with a binding GSA signed with Sembcorp in August, adding to an earlier GSA signed with PGN. However, it is no longer on the strategic project list (see below).

The updated version of the strategic projects from June is shown below.

Strategic Projects, Source: SKK Migas

I covered Hidayah above so won't touch on it again. The other four projects focus on maintaining production at key projects and infrastructure:

• Rantaubais & Minas EOR: a steamflood EOR project at Pertamina's Rokan block that looks at improving recovery from the fields. Steamflood has previously been applied at the Duri field in the same block.
• Muara Bakau - BGC / Merakes East / Maha: these three projects are focused on maintaining production through Eni's Jangkrik FPU in the Muara Bakau PSC. The first covers the addition compression at Jangkrik, whilst the next two are new field developments that will provide backfill.

KeyFacts Energy Industry Directory: Holt Energy Advisors