The number of expat workers in Indonesia is declining due to persistently low commodity prices and the government's stricter regulations regarding the hiring of expats. In the first five months of 2016 a total of 72,399 temporary residential permits (including renewals) were issued to expats. It is highly unlikely that the number of expat workers in Indonesia this year will equal the total of 171,944 foreign workers that were active in Indonesia in 2015. Actually the number of expats working in Indonesia has already been on the decline since 2011 (when the commodity slowdown reemerged).

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Crude oil prices are rebounding, climbing nearly 90 percent from 13-year lows at the start of 2016. However, compared to two years ago crude prices are still down 50 percent hence corporate earnings in the oil and gas industry remain subdued, while few investors are enticed to engage in exploration. To deal with low oil prices, oil and gas companies need to become more efficient thus pushing down production costs in order to optimize earnings. Lets take a look at Pertamina, Indonesia's state-owned energy company. How much does it cost for Pertamina to produce one barrel of oil?

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Indonesia's upstream oil & gas regulator SKK Migas said the nation's crude oil production in the first quarter of 2016 reached the average of 835,234 barrels per day (bpd), slightly above the target of 830,000 bpd that was set in the 2016 State Budget. This is positive news as it is rare for Indonesia to achieve its crude oil output target. In Q1-2016 the target was met due to the combination of a realistic oil production target and long-awaited crude production growth at Exxon Mobil Corp's Banyu Urip field (part of the Cepu Block in East Java).

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Oil production at the Banyu Urip field, part of the Cepu Block in East Java, has finally reached the level of 150,000 barrels per day (bpd) in February 2016 after a long delay. According to Indonesia's oil & gas regulator SKK Migas, production at the field stood at an average of 130,000 bpd in the first month of 2016. The Banyu Urip field, operated by ExxonMobil Cepu Ltd, is expected to reach its top production rate - around 165,000 bpd - in March or April. This would mean that the Banyu Urip field accounts for nearly 20 percent of Indonesia's total oil production.

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The government of Indonesia wants to construct the Bontang oil refinery in East Kalimantan through a private-public partnership (PPP). Sudirman Said, Minister of Energy and Mineral Resources, said construction of the Bontang oil refinery is scheduled to commence in 2017. State-owned energy company Pertamina will be in charge of the project and is now searching for investors to participate in the project which is estimated to require a total of USD $14.5 billion in investment.

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Indonesia turned into a net oil importer in 2004 as domestic oil output declined sharply while domestic fuel consumption surged amid the growing economy (hence becoming more and more dependent on oil imports). Prior to 2016, the Indonesian government provided generous energy subsidies (for fuel and electricity), resulting in a deteriorating budget deficit, trade deficit, current account deficit, and pressure on the rupiah. Moreover, government spending on energy consumption limited room for government spending on productive sectors such as infrastructure and social development.

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Although oil prices somewhat recovered from 12-year lows on Friday (08/01) on China's rebounding stock market there is concern that Indonesia will not achieve its 2016 oil lifting target as the country's oil producers become less eager to boost production rates amid unattractive oil prices. Yesterday, Brent oil fell to USD $32.16 per barrel - the lowest level since 2004 - after China devalued its yuan and Chinese stocks plunged over 7 percent causing the circuit-breaking mechanism to kick in and even causing a global stock selloff.

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The current account balance of Indonesia improved due to the stronger non-oil & gas trade balance. Indonesia's current account deficit eased to USD $4.0 billion, or 1.86 percent of the country's gross domestic product (GDP), in the third quarter of 2015. This performance was much better than the USD $7.0 billion deficit (3.02 percent of GDP) recorded in Q3-2014 or USD $4.2 billion (1.95 percent of GDP) in Q2-2015. Meanwhile, the balance of payments showed a deficit of USD $4.6 billion, up from the deficit of USD $2.93 billion in the preceding quarter.

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The government of Indonesia decided to offer more attractive profit sharing schemes in order to lure investors to invest the nation’s oil & gas blocks. In September, the government plans to auction a total of eight oil & gas blocks with a profit sharing of 30 percent to 35 percent for oil, and 35 percent to 40 percent for gas. The majority of profit will still go to the government. Usually, the government offers a 15 percent profit share for oil and a 30 percent profit share for gas to investors.

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Indonesia’s trade balance surplus widened to USD $1.33 billion in July 2015, improving markedly from the USD $528 million trade surplus in the preceding month and being much higher than expectations of analysts. Based on the latest data from Statistics Indonesia (BPS), Indonesia’s July exports fell 19.2 percent (y/y) to USD $11.4 billion, while imports plunged 28.4 percent (y/y) to USD $10.1 billion. The trade surplus is positive as it supports a narrowing current account deficit (which stood at 2.1 percent of GDP in Q2-2015).

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Crude oil is a fossil fuel that is derived from the remains of plants and organisms that lived on Earth millions of years ago (coal and natural gas also formed under similar conditions). Crude oil is found in huge underground reservoirs – either below land or the ocean floor – where ancient seas once existed.

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Few should be unaware that the world (particularly Western powers) are pushing for renewable energy to replace fossil fuels. It is difficult to find a newspaper or TV station that does not report on this issue on a daily basis.

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Just like essentially all other currencies around the globe, the Indonesian rupiah has been under pressure from tightening monetary policy in the United States (US). This has serious consequences for the energy market since Indonesia is a net oil importer.

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Besides the novel coronavirus (COVID-19) outbreak, another big news story in March 2020 was the massive decline of global crude oil prices. Not only is the price of oil under pressure because of the enormous slowdown in economic activity as various governments have imposed restrictions (such as travel bans) in an attempt to curb the further spread of the coronavirus, but there also emerged big tensions between some of the world’s biggest oil producers that led to tumbling oil prices.

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In the coming 2-5 years, Indonesia is moving forward ambitiously with many energy projects planned from upstream to mid and downstream. Billions of dollars will be invested into upstream oil & gas, coal-gasification, refinery, storage facilities and petrochemical/chemical plants.

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The 5th ASEAN Refining and Petrochemical Forum is set to gather global and regional leadership speakers and brightest minds from the refining and petrochemical industry to discuss and address those issues and challenges facing the whole industry. It is a perfect platform and stage for regional and Indonesian policy makers and regulators, refiners and petrochemical producers, project financing and investors and technology licensors and suppliers to network for business relation.

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The severe oil spill in the Balikpapan Bay (East Kalimantan) could lead to sanctions for Indonesia's state-owned oil and gas company Pertamina. Arcandra Tahar, Deputy Minister of Indonesia's Energy and Mineral Resources Ministry, said his ministry is joining forces with the Ministry of Environment and Forestry to investigate the oil spill case. Five fishermen were killed by toxic smoke, while it is feared that severe damage has been done to marine live and the ecosystem in the area.

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Despite sliding net profit in full-year 2017, Indonesian upstream oil and gas company Elnusa saw its shares surge 42.47 percent to IDR 530 per share so far in 2018. The company's net profit fell 25.80 percent year-on-year (y/y) to IDR 246.14 billion (approx. USD $18.1 million) in 2017, while its revenue actually rose 37.56 percent (y/y) to IDR 4.98 trillion (approx. USD $366.2 million).

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Foreign exchange earnings are important assets for a national economy. Therefore, many nations have recently been taking a much more protectionist approach vis-à-vis trade in an effort to strengthen their trade positions, generate trade surpluses, hence see the inflow of more foreign exchange earnings. Foreign exchange assets support a stable local currency as well as economy.

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Again, oil and gas contractors in Indonesia urge the government to clean up bureaucracy (red tape) in this sector in order to make the investment climate more attractive, and hence trigger more (much-needed) investment in Indonesia's oil and gas industry.

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