Over the past three years, the COVID-19 pandemic and geopolitical instability from the Russia-Ukraine conflict, energy supply disruption and price volatility resulted in an unpredictable macroeconomic situation. The uncertainty has highlighted the "energy trilemma", with the competing interests of energy supply, affordability and environmental sustainability causing energy companies and governments across the world to re-think their net zero strategies. Amid the uncertainty, the investment climate for oil and gas is even more important, as countries strive to satisfy energy demand in a sustainable manner. In Indonesia, as we await the long-planned revision to the 2001 Oil & Gas Law, debate around balancing the need to increase oil and gas production to satisfy the growing economy with Indonesia's 2060 net zero target, has led to discussions on carbon capture and storage (CCS), hydrogen and other new technologies. These will be the next set of challenges to development of new, large-scale oil and gas developments in the country.
Indonesia’s gas industry is being pressured by tough competition in LNG markets and increasing domestic gas “obligation”. Indonesia’s natural gas production market share has actually decreased in recent years. Along with Indonesia's effort to realign natural gas to domestic needs (in line with its 2006 policy), Indonesia still maintains its position as the seventh largest exporter of LNG in 2021 and 2022, behind Qatar, Australia, US, Russia, Malaysia and Nigeria. As Indonesia seeks to leverage higher global oil and gas prices, while reducing the need for imports, the production target for natural gas in 2022 has been set higher.
Oil and gas production has a long history in Indonesia, with Indonesia being an international pioneer in many areas, developing the Production Sharing Contract model and the commercialisation of Liquefied Natural Gas.