Indonesia’s oil and gas regulator seeks Gulf investment

Indonesia aims to produce 1 million barrels per day by 2030. (Shutterstock)
Updated 08 December 2019

Indonesia’s oil and gas regulator seeks Gulf investment

  • SKK Migas hopes Saudi Arabia can help the country reach its 2030 goal

JAKARTA: Big changes are expected in Indonesia's upstream oil and gas sector with a new leadership poised to draw more foreign investment. In an exclusive interview with Arab News, the vice chairman of the industry’s regulating body explains what will happen, when, and why one of the investors should be Saudi Aramco.  

What investors are looking for is policy stability, whether they are secure enough or not to invest, Fatar Yani Abdurrahman, the vice chairman of Indonesia’s oil and gas regulator SKK Migas, told Arab News in Jakarta on Friday.

Under cooperation contract schemes, companies can have either cost recovery or gross-split production sharing contracts (PSC). The new cabinet, appointed in late October, offers flexibility.

Abdurrahman told Arab News that when he asked UAE’s Mubadala, which is already present in Indonesia, what they thought about the country’s policies, “they said they love gross-split and that cost recovery is also good.

“They are very proud of investing in Indonesia, they say they are going to grow here and put (in) more money to explore,” he said, adding that ADNOC (Abu Dhabi National Oil Company) also plans to invest in the country.

But investment from the Middle East has yet to be significant and Abdurrahman expressed hope it would come from Saudi Arabia.

How risky is investment in Indonesia?

“A few weeks ago, I went to ADIPEC (Abu Dhabi International Petroleum Exhibition and Conference) in Abu Dhabi. We opened an SKK Migas booth. Many investors came and what they wanted to know was how easy is it to invest and how secure it is, not only in terms of policy security, but also the country's security. And Indonesia is a very low-risk country,” Abdurrahman said.

Indonesia is currently implementing a policy that is adaptive to oil prices. “You will not find this in any other country,” he said.

“If the oil price is suddenly hiking, the government will benefit also, so the split will be adjusted. If the oil price goes down, which is very bad for investment, our government will sacrifice its return for the contractor to sustain their production,” Abdurrahman said.

However, as all kinds of policies in Indonesia are often subject to change, many investors worry about their long-term prospects. According to the SKK Migas deputy chief, these changes cannot act retroactively.

“When they sign a PSC, they will stay until the PSC expires. The government will honor it. Long-term planning depends on what you sign in the document. It will stay until you finish,” he said.

One of the biggest hurdles for investors, not only in the upstream sector, is Indonesia’s notorious red tape. For example, if a company wants to start exploration, it will require more than 150 permits.

“We are aware, and know it cannot stay like this,” Abdurrahman said, adding that the situation would improve soon, as SKK Migas  will launch a one-door service policy by early January.

“We want all oil and gas companies to come and see us, they will apply for permits and we can manage this. SKK will be the leader proposing to other institutions and we will talk to relevant departments what needs to be cut,” he said. The initiative was already accepted by Arifin Tasrif, the country’s new minister for energy and mineral resources.

“It will take some time, because we need to change the culture as well, it’s not easy but we have to do it,” Abdurrahman said. He expects that within a year or two red tape will be cut to 10 permits, and that it will about five years for a company to start production.

To expedite, SKK Migas is also investing in digitalization.

“It will accelerate the whole process, IT technology, artificial intelligence, will help us. This is our dream. We would monitor production, there will be no need to wait until people send us reports. We are now constructing our integrated operations center, we will launch it on Jan. 1.”

By the end of December, the regulator is also going to announce its long-term strategic plan, “to ensure we can achieve 1 million barrels a day by 2030,” said the vice chairman, who prior to his current role worked at ExxonMobil, Shell and Petronas.

“We have identified 12 prospects across the Archipelago. We can go offshore, we can go deep oil. This data is open to oil companies, you can come (to SKK Migas) and take a look free of charge. In other countries you have to pay,” Abdurrahman said.


Greek town bets on slow tourism to overcome virus

Updated 52 sec ago

Greek town bets on slow tourism to overcome virus

  • The pandemic is an opportunity to promote alternative tourism, fishing tourism

PREVEZA, Greece: Yannis Yovanos scans the waters of the Ambracian Gulf with his binoculars for dolphins shooting into the air before curving back down into the sea.

His early warnings prompt just a dozen tourists on the deck of Yovanos’ small boat to scramble for their smartphones, hoping to secure a snap of the aquatic mammals’ aerial acrobatics.

Officials in his home town of Preveza hope that it’s just this kind of small, family-run business that will help them overcome the coronavirus’ impact on travel — while sparing the region the environmental impact and economic distortions of the mass tourism more common on Crete or the Ionian islands.

“We don’t want to stay all day on a beach, we’re looking for a different experience,” said Dutch tourist Frederika Janssen.

“The pandemic is an opportunity to promote alternative tourism, fishing tourism,” as well as local life and culture “directly related to the natural resources that date from Antiquity,” said Constantin Koutsikopoulos, who heads the agency charged with managing the Ambracian Gulf.

Inside the gulf is a protected wetlands park, some 400 sq. km that is one of Europe’s Natura 2000 wildlife diversity regions.

One hundred and fifty dolphins, loggerhead sea turtles and 300 species of aquatic birds including the rare Dalmatian pelican live in the lagoons and reed beds of the gulf.

Nestled between green hills, the Ambracian Gulf is fed by rivers descending from the mountains of the Epirus region of northwestern Greece.

Yovanos’ hometown guards the little strait that connects the gulf with the Ionian Sea.

Dolphin watching trips like these mean “I am realizing my dream of living the life of a fisherman among our natural riches,” said the 49-year-old from behind a greying beard.

For Greece as a whole, a gamble on reopening its borders to tourists as early as June appears to have paid off for now.

New coronavirus cases have appeared only slowly since then, with fewer than 6,000 cases and just over 200 deaths nationwide from the pandemic.

Although Preveza has opted for a slower, more family-oriented approach to travel compared to better-known Greek destinations, it hasn’t renounced Mediterranean holiday clichés altogether.

With the sector suffering a big hit from the coronavirus epidemic, Preveza city officials launched a promotional campaign, securing the title of safest place for a European beach holiday from website European Best Destinations.

“Monolithi beach, the main beach of Preveza, is ... the longest one in Europe... you won’t have to struggle to get a nice spot, fix your beach umbrella and spend relaxing days in the sun,” it wrote.

And new infrastructure in the shape of a marina has helped draw sailors away from packed ports on the islands.

“Preveza is the right place compared to Corfu which is a very nice island but very crowded,” said Nick Ray, a British businessman, from the deck of his yacht that had put into the town’s port.

With its fishing and fish farming, the Ambracian Gulf is already the region’s economic motor.

Sustainable, environment-focused tourism should give the authorities even more reason to deal with the threats to the gulf such as pollution, poaching and illegal fishing.

There’s even something for ancient history buffs in the ruins of Nicopolis, founded by Caesar Augustus in honor of his naval victory nearby in 31 BC, where some Roman mosaics are still preserved.