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Indonesian President Joko Widodo on Wednesday slammed state-owned oil firm Pertamina. saying it hadn’t invested enough in exploration. while blasting red tape hobbling the industry and urging investors to report problematic rules to him directly.
Widodo’s comments come after the government in April sacked Pertamina’s [PERTM.UL] chief executive after repeated clashes with the government over fuel price controls estimated to have cost the firm some $1.4 billion from January to September last year.
“What often makes me shake my head in the oil and gas sector. for example. is Pertamina.“ said Widodo. speaking at the opening of the annual Indonesia Petroleum Association (IPA) conference. “Since the 1970s there has never been major exploration. What is going on?“
Indonesia was once a major crude oil producer and exporter. and a member of the producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) with output reaching more than 1.6 million barrels per day (bpd) in 1995.
But a lack of investment to find new reserves meant it became a net oil importer by 2002. and since then international firms ConocoPhillips and Chevron have reduced holdings. Indonesia’s output now stands well below 1 million bpd.
Private investment in the oil and gas sector slumped to a multi-year low of $9.3 billion in 2017. compared to a target of $13.8 billion. according to BMI Research.
Widodo said on Monday he had directed the country’s Energy and Mineral Resources Minister to “axe as many regulations as possible“ in an effort to improve investment.
“I need to remind our ministries that our regulations are not conducive (to investment). They are still convoluted. there’s still a lot of procedures and they’re still complicated.“ he said.
“I want to know which regulations are still creating headaches.“ he added. “Please report to me or the minister.“
Hoping to attract more investment. Jakarta has recently eliminated a raft of regulations and introduced tax breaks.
Indonesia announced four winners from five blocks in a direct offer tender on Wednesday. including Lion Energy and units of ENI and Repsol.
Despite this. interest in Indonesia’s tenders has been tepid. and industry participants have pointed to more attractive opportunities in other countries.
A report released by Bernstein Research on Wednesday showed the majority of current global offshore oil drilling activity was concentrated in the Atlantic basin. Within Southeast Asia. most activity is in Malaysian waters.
