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Dandi Alvayed
Dandi Alvayed Mohon Tunggu... Insinyur - Director of Communication at the Indonesian Petroleum Engineering Association Saudi Arabia (IATMI-KSA) 2024/2026

Dandi Alvayed, Director of Communication at the Indonesian Petroleum Engineering Association Saudi Arabia (IATMI-KSA) 2024/2026, earned his bachelor's degree in Petroleum Engineering from Pertamina Univeristy, Indonesia in 2021. As a petroleum expert in the Indonesian oil and gas industry, he began his career at Global Energy Corp. before becoming the most productive graduate nomination in July 2021. Recently, Dandi has completed his master's degree at the College of Petroleum Engineering & Geosciences, Department of Petroleum Engineering, King Fahd University of Petroleum and Minerals, Saudi Arabia. His thesis focused on the mechanical integrity of shale formations using supercritical carbon dioxide and hydrogen at the nano and macro scales through experiments and simulations, enabling him to be selected as a Top 3 Finalist in the SPE Middle East and North Africa (MENA) Paper Contest at the SPE International, Muscat, Oman 2024. Early in his master's career, Dandi has published several international publications, one of which is titled "Probabilistic Estimation of Hydraulic Fracture Half-Lengths: Validating the Gaussian Pressure-Transient Method with the Traditional Rate Transient Analysis-Method (Wolfcamp Case Study)" in the Journal of Petroleum Exploration and Production Technology. In addition, Dandi is also interested in various research topics in the field of renewable energy and alternative energy, holding the position of Chairman of the PPI Dunia Energy Commission 2022/2023. To contact the author, please reach out via https://www.linkedin.com/in/dandialvayed/ and email: dandialvayed@gmail.com.

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Ilmu Alam & Tekno

The Current State of Indonesia's Oil and Gas Industry: Challenges and Prospects

12 Oktober 2024   05:30 Diperbarui: 12 Oktober 2024   07:15 137
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Figure 1. Indonesia Oil and Gas Reserves vs Production (Handbook of Energy & Economic Statistics of Indonesia, 2021)

Introduction

Indonesia’s oil and gas industry remains a cornerstone of the national economy, even as the world shifts toward renewable energy. Oil and gas will continue to serve as critical components of the country’s energy supply for the foreseeable future. This article explores the current state of the industry, highlighting reserves, production, investment, infrastructure development, key challenges, and government efforts aimed at sustaining growth in this vital sector.

Reserves and Production

Indonesia’s oil reserves are projected to last approximately 9.5 years, while natural gas reserves could sustain production for up to 19.9 years at current extraction rates (Handbook of Energy & Economic Statistics of Indonesia, 2021). However, crude oil production has been declining, averaging just 661,000 barrels per day in 2021 (Figure 1). This decrease is primarily due to the aging of existing fields and the lack of major new discoveries.

In contrast, natural gas production has been more resilient, reaching 5,481 million standard cubic feet per day. To counterbalance declining oil output, the government is aggressively promoting exploration activities to uncover new reserves and bolster production levels.

Investment and Infrastructure

Investment in Indonesia’s upstream oil and gas sector reached USD 15.56 billion in 2023 (PwC, 2023), with a focus on exploration and exploitation activities aimed at increasing reserves and production (Figure 2). Significant attention has also been directed toward enhancing natural gas infrastructure. A prime example is the Cirebon-Semarang (CISEM) gas transmission pipeline, a project designed to improve natural gas distribution and availability throughout the region.

Given Indonesia’s vast archipelago, developing infrastructure that supports efficient transportation and processing of hydrocarbons is challenging. The government has been addressing this by investing in strategic projects aimed at improving connectivity and alleviating bottlenecks in the oil and gas supply chain.

Figure 2. Investment in Indonesia's Oil and Gas Sector Over Time (PwC, 2023)
Figure 2. Investment in Indonesia's Oil and Gas Sector Over Time (PwC, 2023)

Challenges and Government Initiatives

One of the industry's most pressing challenges is infrastructure bottlenecks in the downstream sector. Outdated facilities are often unable to meet the growing demand for energy, necessitating substantial investment in refining, processing, and distribution capacity. The government has responded with increased infrastructure development while simultaneously promoting energy diversification.

Another ongoing challenge is the volatility of global oil prices. Indonesia’s oil and gas sector, like many others, is highly sensitive to geopolitical risks, economic shifts, and fluctuations in supply and demand. As highlighted by Bahlil Lahadalia, the Minister of Energy and Mineral Resources in 2024, “The high volatility of crude oil prices significantly impacts Indonesia’s ability to plan long-term energy strategies and maintain stable revenues.” To mitigate these risks, the government has encouraged the adoption of long-term contracts and hedging mechanisms to stabilize revenues.

Additionally, Indonesia has been a net importer of oil since 2014, creating a drive to reduce dependence on foreign supplies. The government aims to reverse this trend through increased domestic production and energy efficiency initiatives. Moreover, efforts to diversify the energy mix by promoting biofuels and renewable sources are underway to reduce reliance on fossil fuels.

Environmental and Social Considerations

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