(MENAFN- Gulf Times) Indonesia, Southeast Asia's largest economy, is trying to stimulate its decrepit oil and gas industry in an aim to feed the rapidly rising demand for fuel among its 240mn-population and its growing middle class. Latest news that the country is about to receive a whopping $7bn investment from Oman to build oil storage facilities, a petrochemical plant and a refinery is seen as just the beginning of a bigger drive to call for new tenders for oil and gas blocks and seek foreign investments into oil production and related facilities and into upgrades of the poor infrastructure in the sector.
The Oman investment is part of plans to raise national fuel output in Indonesia by state-owned oil and gas giant Pertamina, which operates almost all of Indonesia's refinery capacity, from the current 1mn barrels per day (bpd), a volume far from accommodating domestic demand, to 2.3mn bpd through upgrades and additional plants, according to the country's energy minister Sudirman Said. The refinery to be built in Indonesia's Riau province will see its groundbreaking procedure in 2016 and its products will be purchased by Pertamina, Said added.
Experts reckon that Indonesia's energy industry needs a far larger number of new investments in both its exploration and refining sectors in order to significantly upgrade its energy capabilities. For example, Indonesia's fuel output has suffered from a lack of investment in its refining sector since the construction of its last refinery was completed in 1994.
According to data collected by the US Energy Information Administration (EIA), Indonesia's energy consumption increased by 44% from 2002 to 2012, with petroleum accounting for the highest proportion of this increase. Despite its sizeable oil reserves, Indonesia shifted from being a net oil exporter to a net importer as early as in 2003 and even suspended its membership in the Organisation of Petroleum Exporting Countries (Opec), in 2009, after joining in 1962.
This exit was prompted by growing internal demand for energy, declining production and limited investment to increase capacity. The country's poor infrastructure, together with its complex geographic structure, and a difficult regulatory environment have affected these investments in the past.
In 2012, 25 new oil and gas contracts were signed, but the number fell to 14 in 2013 and reached a low of seven in 2014.
This year, things look a bit better. Indonesia's Ministry of Energy and Mineral Resources in 2015 already awarded 13 new oil and gas blocks to the likes of ConocoPhilips, Shell, Total and Statoil with combined investment commitments of $155.8mn, and another 11 should follow. Pertamina said it plans to construct a $450mn crude oil terminal in East Kalimantan that will allow the company to blend its domestic crude oil with other grades of imported crude oil and act as an oil stock reserve for the country.
As of latest figures of 2013, the lion's share (26%) of Indonesia's crude oil imports came from Saudi Arabia. The United Arab Emirates delivered 5% and Qatar 4%. Most of Indonesia's own crude is exported to Japan, Thailand and Australia. Revenues from the oil and gas sector accounted for about one quarter of total state revenue.
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