Indonesia to cut oil/gas licence requirements

The licences that a company needs to secure before conducting exploration activities are expected to streamline a lengthy bureaucratic process that is considered a major hurdle for oil and gas contractors operating in Indonesia. 

Energy and Mineral Resources Minister Jero Wacik said one of his four challenges was to boost oil and gas production amid ageing oil fields. He said easing licences would trigger more exploration, which would in turn increase production.

“We are auditing several exploration licences. We think we can eliminate some of the licences [needed],” Jero said during a keynote speech at an oil and gas business forum held in Jakarta on Monday.

The ministry’s director general for oil and gas, Edy Hermantoro, said licences would be short-listed into eight categories: for forest areas; from a provincial administration; from a regency administration; on the crossing of railways; on land clearing; on the use of foreign flagged vessels; on waste dumping; and on the regulation of dry docking for FSO (floating, storage and off-take) or FPSO (floating production, storage and off-take).

“The master list [of licenses] will remain the same but random checks might be conducted,” said Edy, also present at the forum.

He said there would be a joint decree from related ministries by the coordinating economic minister to regulate oil exploration procedures, but declined to reveal when it would be issued.

Upstream Oil and Gas Regulatory Special Task Force SKK Migas acting chief Johannes Widjanarko said the country only had 3.7 million barrels in proven oil reserves left, while it still had abundant natural gas resources.

“The oil and gas reserves are still plentiful. But we need supporting data to find hydrocarbons in other places. We [...] need massive exploration supported by all parties,” he said.

Indonesia Petroleum Association (IPA) chairman Lukman Mahfoedz, who is also president of Jakarta-listed oil firm PT Medco Energy Internasional, pointed out that the country’s oil production was decreasing while demand continued to climb.

The country’s demand is expected to reach 8.3 million barrels of oil per day (mmboepd) in 2022, and a gap between supply and demand in the country will reach three mmboepd by 2030.

“A huge upstream investment of an estimated $28 billion [Bt871.56 billion] per annum is required to increase the oil and gas supply. With such a huge amount, investors require a conducive business climate to invest,” said Lukman. “Moreover, synergy and alignment among stakeholders is required to simplify bureaucracy.”

Head assistant of the Presidential Working Unit for Supervision and Management of Development (UKP4) Agung Wicaksono pointed out the complexity of in oil and gas licence procedures. 

According to Agung, under 69 current licence groups, there are 284 licensing processes, with 600,000 requirements. Those licences are issued by 17 institutions that must work on 5,000 licences per year.