The Special Task Force for Upstream Oil and Gas Business Activities aka SKK Migas has prepared a number of procurement packages for upstream oil and gas projects this year. There are 1,481 packages prepared with a procurement value of US $ 6,085 billion or around Rp. 85.5 trillion. Acting Head of Program and Communication Division of SKK Migas Susana Kurniasih said the value of the package increased by 26% compared to the realization in 2020. The increase was aimed at maintaining the level of oil and gas production. "The increase is encouraging because it shows investors still see opportunities for the upstream oil and gas industry in the long term," Susana told Katadata.co.id, Tuesday (19/1).
The final target of this year's oil and gas project is to boost the national economy. Every US $ 1 billion or Rp 14 trillion spent in this industry will generate an economic output of US $ 1.6 billion or Rp 22.5 trillion. Its contribution also includes the addition of gross domestic product or GDP which reached US $ 700 million or Rp. 9.8 trillion. Then, there is also an increase in regional revenue, for example, revenue sharing funds or oil and gas DBH. The realization of commitment at the domestic component level or TKDN in 2020 from this sector was 57%. The figure will be similar to the 2021 target. Cooperation contract contractors aka KKKS that use the gross split scheme are not included in this procurement data. The expenditure regulation does not need to go through the coordination or approval of SKK Migas. Of the 1,481 tender packages prepared, 437 packages were under US $ 1 billion and worth US $ 246.5 billion or Rp 3.5 trillion. Then, the procurement packages between US $ 1 million to US $ 5 million totaling 581 packages worth US $ 1.785 billion or Rp.25.1 trillion. For procurement packages over US $ 5 million, there were 193 packages worth US $ 6.068 billion or around Rp.85.5 trillion. The value of the largest procurement package is Pertamina Hulu Mahakam (PHM) amounting to US $ 1.484 billion or Rp 20.8 trillion. Meanwhile, the highest number of procurement packages was at KKKS Pertamina EP with 627 procurement packages.
The upstream oil and gas industry is under heavy pressure. The performance of the old field continues to decline. Without new exploration, production will certainly decline. It's not quite there yet, the Covid-19 pandemic has emerged. Many international energy companies put a brake on their capital spending. Last year, global oil and gas investment fell 30%. Indonesia is still quite lucky. SKK Migas data shows that 2020 investment only fell 20%. However, there are many large projects that are still hampered by progress.
Another problem is that this sector must face stiff competition from renewable energy or EBT. BP, Shell and Total have stated their commitment to make this transition from fossil energy. Under these conditions the government needs to radically improve regulations. Secretary General of the Association of Oil and Gas Companies (Aspermigas) Moshe Rizal said there is still hope in the upstream oil and gas sector. Indonesia's potential is still very large. The government needs to package it to be attractive to investors. "Make investors comfortable by providing legal certainty and a return on their investment," said Moshe last week. The government needs to provide attractive incentives. Moshe also encouraged the government not to interfere with the technical development and management of oil and gas fields. Investors hope that licensing and approval of work plans and budgets can be facilitated. "Then, SKK Migas is only in charge of monitoring so that cooperation contract contractors (KKKS) do not go out of the way," he said.
