Indonesia's Classic Oil Lifting Problem - Aging Oil Fields and Lack of Investment
Since the mid-1990s, Indonesia's crude oil production has been experiencing a significant decline, forcing the country to leave the OPEC. Problematically, regulatory and legal uncertainty have been undermining the attractiveness of the investment environment, meaning that Indonesia has become - to a significant extent - dependent on the aging oil fields that are unable to meet all domestic oil demand.
Key takeaways:
- Indonesia has maturing oil fields, with 80% of Pertamina's fields being 'old'.
- Fragile Rokan block is the backbone of Indonesia's oil production.
- 'Easy oil' is gone; capital-intensive and high-tech strategies are now required.
- Indonesian government aggressively tries to attract foreign capital.
Therefore, it is interesting to take a closer look at Indonesia's key crude oil producer: Pertamina Hulu Energi (PHE). PHE is the primary engine behind Indonesia’s energy security. What makes this company particularly interesting is its current transition from a traditional oil company into a high-tech, mature field specialist as well as a leader in carbon management.
PHE is also active outside Indonesia with international assets in Algeria, Iraq, Malaysia, and through its stake in Maurel & Prom (Africa and Latin America).
Edi Karyanto, Director of Strategic Planning, Portfolio and Commercial at PHE, said the company’s contribution to Indonesia's oil and gas production is dominant. Out of the total national oil production of around 600,000 barrels per day (bpd), approximately 69 percent comes from PHE. In 2025, PHE produced 557,000 bpd, which is targeted to be raised to 595,000 in 2026. This would mean the majority of Indonesia’s national oil lifting target of 610,000 bpd for 2026 will come from this sub-holding of Indonesia's state-owned energy giant Pertamina.
PHE does not only produce crude oil at home, in Indonesia. Of the total oil production target produced by PHE in 2026, 404,000 bpd is planned to come from domestic fields and blocks, which would be an increase from 396,000 bpd in 2025.
Table 1; Crude Oil Reserves in Indonesia (in billion barrels):
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
| Proven Reserves | 2.48 | 2.44 | 2.25 | 2.27 | 2.41 | 2.29 |
| Potential Reserves | 1.29 | 1.73 | 1.70 | 1.90 | 2.29 | 2.02 |
Source: Ministry of Energy and Mineral Resources
Beyond oil, PHE also contributes about 32–35 percent to national gas production, achieving 2.8 billion standard cubic feet per day (BSCFD) out of a national total of 5.5 BSCFD in 2025. To maintain this trend, PHE will rely on intensive upstream activities, ranging from exploration well drilling to the development of new work areas.
However, aging oil fields is a major challenge for PHE. The production decline rate is quite steep due to increasing water levels in the reservoirs that are managed by PHE, which accelerates the drop in oil output. In response, PHE is pushing various strategies, such as Enhanced Oil Recovery (EOR), including full implementation in the Minas field (Riau, Sumatra) and continued steam flood development in Duri (Riau). Large projects such as Masela (Maluku) are also part of the company's medium-term strategy.
Table 2; National Oil Lifting of Indonesia (in barrels of oil per day):
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
| Oil Lifting | 706,700 | 660,300 | 612,300 | 606,000 | 579,700 | 605,300 |
Source: Ministry of Energy and Mineral Resources
Meanwhile, oil and gas practitioner Hadi Ismoyo said that operational challenges in Indonesia's major oil and gas fields are crucial factors that could undermine the targets of PHE. He highlighted the Rokan Block as the backbone of production, which frequently faces operational disruptions, particularly regarding power supply reliability for steam flood projects. It is a real risk that the backbone of domestic oil production is actually quite fragile.
According to Ismoyo, the primary strategy should be restoring operational reliability in those areas. Furthermore, the decline in old fields must be balanced with massive workover programs and new well drilling. He emphasized the importance of removing bottlenecks in existing projects, developing marginal fields, and unlocking low-quality reservoir potential through hydraulic fracturing technology.
Structurally, the national upstream industry faces a tough reality: about 80 percent of Pertamina’s fields are "mature", with water-cut levels reaching 70–95 percent. Making matters worse, it uses aging facilities and has to cope with relatively high lifting costs.
Pri Agung Rakhmanto, Founder of ReforMiner Institute, noted that the 2026 lifting strategy is still short-term and highly dependent on operational smoothness. He suggested that high oil prices currently provide an opportunity to improve project economics, but the main hurdles remain the speed of decision-making, licensing, and procurement efficiency.
Table 3; Investment in Indonesia's Upstream Oil and Gas Sector (in USD billion):
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
| Investment | 0.6 | 0.5 | 0.6 | 0.7 | 0.9 | 1.3 | 1.5* |
* Target
Source: SKK Migas
For the medium to long term, Rakhmanto said a more fundamental approach is needed to reach the 1 million bpd target, including massive EOR in Rokan and exploring non-conventional oil and gas (MNK).
On the regulatory side, the government plans to release 10 potential oil and gas blocks that have undergone studies by the Geological Agency and Lemigas to ensure better data quality for investors. These areas include Rupat (Riau), Puri (Riau), and Northern Papua, among others. To attract investors, the government is offering more attractive fiscal terms, with contractor splits reaching up to 50 percent. This is a significant increase from the previous 15–30 percent range.