The market for oil and gas equipment in Indonesia remains attractive and has a promising long-term outlook. The country’s production was 954,000 barrels per day
(bpd) output of crude and condensate in 2010, is slightly lower than the target of 965,000 million bpd. In 2011, it is estimated that production will be 970,000 bpd. In 2010, the GOI awarded 21 Production Sharing Contracts (PSC) for oil and gas and three coal bed methane PSCs. Currently, 232 oil and gas contractors are operating in Indonesia, of which 64 are in production stage and 168 are in exploration stage. From 64 working areas, 43 have been producing oil and gas.
In 2009, investment in the oil and gas industry reached $11.3 billion, decreasing from $12.2 billion in 2008. The investment in 2010 was $13.5 billion and it is expected to reach $14.9 billion in 2011.
Indonesia imported $1.1 billion of oil and gas equipment in 2010. Imported U.S. products represented 30 percent of the total import value. The actual import value of U.S. products could be higher than reported, because many U.S. products are imported to Indonesia through Singapore. Industry sources estimate that the market will increase by ten percent, with U.S. market share increasing in response to expanding exploration and the enhancement of existing oil fields
Recently, BP Migas issued a revised regulation called PTK 007 (revised in November, 2009), which regulates in more detail the preferences of local content for the oil and gas business. Basically, the GOI is trying to encourage the use of local products (as instructed in the Presidential Decree Keppres No 2, and Ministerial Regulation Permen No 49). For example, the decree stipulates mandatory use of a national bank in oil and gas transactions, mandatory use of local products (if local content is above 40 percent), preference to use local products (if local content is above 25 percent), and agreement to achieve certain percentages of local content for services job. The local content is verified by a third party, such as PT Surveyor Indonesia.
U.S. companies are strong suppliers of parts for boring/sinking machinery, drill pipes for oil and gas, pumps, compressor/pump parts, and floating or submersible drilling production platforms.
Based on market observations and discussions with agents and distributors, drilling and production equipment has the most potential. With a total value of more than 60 percent of the total expenditure, this category includes drilling, machinery, mud equipment and accessories; production surface equipment; drilling tools and retrievable production tools; casing, tubing and accessories; cementing equipment and liner hanger systems; fishing and repair tools (drilling); drilling and mud control instruments; production well test and monitoring instruments; wellhead equipment and accessories; production string components and subsurface pumps; derricks and accessories; and geological and geophysical operating equipment.
In 2011, the GOI plans to offer 39 work areas through regular tender and 11 work areas through direct offer. In addition, the government also offers 10 new CBM work areas.
The GOI also plans to develop three LNG receiving terminals in Medan, West Java and East Java, city-gas distribution networks in several cities, two small refinery plants, three small LPG plants, and natural gas infrastructures for transportation.
Most of the oil and gas production (90%) in Indonesia will come from mature fields, which are continuing to decline. In its efforts to increase oil and gas production, BP Migas will reactivate oil wells. BP Migas has identified old wells in the working areas of Pertamina EP Cepu (1,967 wells), Pertamina Lirik (37 wells), Pertamina Kalila (8 wells), Kalrez (123 wells), and Chevron Pacific (236 wells). The GOI will give the opportunity to local cooperatives or state-owned regional companies to operate old wells. The secondary recovery from the mature fields provides opportunities for American firms to introduce Enhanced Oil Recovery technology (EOR).
Construction of additional oil and gas facilities in Indonesia should bring significant commercial opportunities for U.S. companies that supply engineering services and equipment such as compressors, metering systems, and pumps.