First-half oil, gas investment drops 15%

Realized investment in the country?s oil and gas sector in the first-half of this year fell by about 15 percent to US$4.8 billion from $5.65 billion in the same period of last year due to the weak oil price environment.

Director General of Oil and Gas at the Ministry of Energy and Mineral Resources Ego Syahrial said at a press conference on Tuesday that the weak oil price environment has prompted oil and gas contractors to withhold investment spending as they adopt efficiency measures.

He said that with realized investment in the first semester of this year of only $4.8 billion, the initial full-year target of $22.2 billion would not be achieved. He said that a more realistic target is around $12 billion-$13 billion. ?The initial target was overly optimistic,? he said.

Ego said that a number of upstream and downstream projects are expected to start making significant contribution to investment in the second semester of this year.

He pointed out as examples on Chevron?s second phase development of the Indonesian Deepwater (IDD) project, and Eni?s Jangkrik field development project.

He added that drilling activities by state-owned oil and gas firm PT Pertamina at the Masela block in East Kalimantan will also contribute to realized oil and gas investment in the second-half. He said that BP?s Tangguh LNG Train III project in West Papua is also expected to start construction process.

In the downstream sector, gas pipeline development as well as construction of oil refineries will also contribute to investment in the second semester of this year, he said.

Meanwhile, Deputy Minister of Energy and Mineral Resources Arcandra Tahar dismissed suggestion that the government?s policy to apply the gross split scheme in new oil and gas contracts have weakened investment appetite in the upstream oil and gas sector. He insisted that investment has been on a declining trend since the past couple of years due to the weak oil price environment, while the gross split scheme was only started earlier this year.

Ego concurred. He claimed that the new gross split scheme, which replaces the cost recovery mechanism in oil and gas contracts, have actually responded positively by investors. He pointed out that tender of new oil and gas working areas last year only received one bid. ?Today, we the gross split scheme, there are already 15 (bid documents) from contractors who responded positively,? he said.

Editing by Reiner Simanjuntak