Higher expenditure: Oil storage tanks in Jakarta. Despite softness in current oil prices, Indonesia will increase its investments in the sector this year. — Bloomberg
JAKARTA: Indonesia’s oil and gas upstream revenue is expected to fall short of its target for this year, the country’s energy regulator says, as lower-than-expected global crude prices weigh on earnings despite strong investment and production performance.
The benchmark Indonesian Crude Price (ICP), assumed at US$82 per barrel in the 2025 state budget, has averaged below US$70 so far this year, dragging down state revenue even as output remains relatively stable.
According to the Upstream Oil and Gas Regulatory Special Task Force (SKK Migas), state revenue from the upstream sector in the first half stood at US$5.88bil, or 45.1% of the full-year target of US$13.03bil set in the 2025 state budget.
“It’s because the oil price set in the state budget is US$82 per barrel, but in reality, the average has been below US$69 to US$70 per barrel. So even if we hit our production target, the lower prices automatically bring the numbers down,” SKK Migas head Djoko Siswanto said on Monday.
The regulator now projects total receipts by the end of the year to reach only around US$10.83bil, or roughly 85% of the state budget assumption.
SKK Migas deputy for finance and commercialisation Kurnia Chairi added that the weaker state revenue outlook was not only due to falling crude prices but was also partly influenced by oil and gas production.
The country’s oil production in the first half of the year averaged 578,000 barrels per day (bpd), or 95.5% of the 2025 state budget target.
Gas production reached 5,554 million standard cubic feet per day (mmscfd), slightly below the annual target of 5,628mmscfd.
However, actual gas delivered to end users lagged behind production levels, reaching only 5,483mmscfd, or 97.4% of the target.
“State revenue depends mainly on production. Based on current trends, we expect production to be in line with the 2025 budget target,” Kurnia said. “But now we expect the ICP to average around US$70 to US$72 per barrel this year, and that will weigh on state receipts.”
While revenue has weakened, investment in the upstream sector posted strong growth. SKK Migas recorded a 28.6% year-on-year increase in upstream investment to US$7.19bil in the first half of this year, up from US$5.59bil a year earlier.
The agency expects total upstream investment for the year to reach between US$16.5bil and US$16.9bil, surpassing the 2024 realisation of US$14.4bil and marking the highest annual investment in a decade.
In June, French energy giant TotalEnergies announced its return to Indonesia by securing a 24.5% stake in West Papua’s Bobara oil and gas block from Malaysian energy company Petronas, which retains a 75.5% majority stake.
TotalEnergies has a long history in Indonesia’s upstream sector, particularly as the former operator of the Mahakam Block in East Kalimantan, before the contract expired in 2018 and full operations were handed over to state-owned Pertamina.
Aside from TotalEnergies, other major players like Shell and Chevron are expected to return to Indonesia.
In addition, South Korea’s Daewoo Engineering & Construction is reportedly planning to invest around US$1bil across various industries, including oil and gas. — The Jakarta Post/ANN
