Indonesia Needs to Improve Fiscal Attractiveness in Upstream Sector

Wood Mackenzie reveals that the appeal of Indonesia's upstream oil and gas industry is currently lagging behind other countries, even though its government has made several improvements. Without perfect incentives and policies, national oil production will keep declining. Wood Mackenzie Research Director for the Asia Pacific, Andrew Harwood, argued that one of the important attempts to revive the upstream oil and gas industry and meet the production target of 1 million barrels of oil per day (BOPD) and 12 billion standard cubic feet of gas per day (BSCFD) by 2030 was to increase fiscal attractiveness.

Harwood explained that Indonesia needed to go the extra mile to be more competitive in the upstream oil and gas sector, despite having provided several breakthroughs such as allowing oil and gas contractors to choose the preferred contract scheme. "Hopefully, the government does not stop with incentives, since other countries keep develop and improve in the investment climate," he said in the 2020 Economic and Financial Group Discussion Forum (FGD) recently held online with the topic of the discussion on the strategic collaborative synergy and effective fiscal terms.

Harwood assessed that Indonesia's fiscal attractiveness value was even far below Malaysia’s but still above those of Iraq and Brazil. However, investors tend to choose Iraq and Brazil due to better investment climates than Indonesia. The accumulation of oil and gas prospects is one of the factors influencing investors’ decisions, besides the existing fiscal terms. “In 2010, Brazil became a favorite investment target and attracted large-scale investors. It also happens to Iraq. Even though its current fiscal policy is not very good, the oil and gas prospects in Iraq are quite good," he revealed.