Indonesia aims to reverse production decline with upstream push

Indonesia is aiming to accelerate its upstream output by auctioning 60 blocks in the next two or three years as part of the country's efforts to reverse declining production of domestic oil and gas, a senior government official said May 21.

The ambitious plan to expand the upstream strategy comes at a time when global major energy companies, such as Chevron, Shell, and TotalEnergies, are exploring a return to Indonesia's upstream oil and gas sector.

"There are still 60 working areas that we will tender in the next two to three years," Energy and Mines Minister Bahlil Lahadalia said at the Indonesian Petroleum Association Convention and Exhibition, adding that the working areas were spread across several locations, including one in the Makassar Strait in Geng North.

Indonesia is working to reverse a long-term decline in oil and gas output. Production peaked at 1.6 million b/d in 1995. The government has set a target of 1 million b/d by 2030, though it may be delayed by up to three years. For 2025, the country aims to produce 605,000 b/d of crude and 1.005 Bcf/d of gas.

In 2024, oil output reached 579,700 b/d, below the target of 635,000 b/d. However, gas output surpassed expectations at 5.75 Bcf/d, exceeding the target of 1.033 Bcf/d.

Need to ease regulations

President Prabowo Subianto urged the country's upstream sector and policy-making bodies to ease regulations, which would help to attract investments from within the country and from overseas.

"I am asking the regulatory bodies to simplify the regulations -- I repeat -- simplify the regulations. Officials who refuse to simplify the regulations will be replaced and will be dismissed!" said Subianto May 21 at the same event.

Acting Director General of Oil and Gas at the Ministry of Energy and Mineral Resources, Tri Winarno, said that as part of the efforts, Jakarta will be offering the Gagah Block, located onshore in South Sumatra province, through the regular mechanism. It has a resource potential of about 173 million barrels of oil and 1.1 Tcf of gas. In addition, the Perkasa Block, located onshore and offshore East Java and with an estimated resources of around 228 million barrels of oil and 1.3 Tcf of gas, will also be offered.

Meanwhile, the Lavender Block will be offered exclusively to Pertamina, as per a ministerial regulation that allows Pertamina to propose direct offers for oil and gas working areas. The Lavender Block is located onshore and offshore in South Sulawesi and Southeast Sulawesi provinces, with a gas resource potential of around 10 Tcf.

The government is offering attractive incentives, such as raising the contractors' share of the profit to more than 45%–50%, compared with 15%–30% previously, to encourage more participation in exploration activity, he said.

Transfer of management

In a move to maximize production from existing assets, Lahadalia said that management of idle blocks to oil and gas companies would be transferred to units that are more capable of managing them.

"There are currently 10 working areas that already have a plan of development, but they are idle and not running. With the capacity of these 10 areas, we could increase production by 31,300 b/d," said Lahadalia.

A total of 10 oil and gas fields that have received development plan approval have yet to be worked on, despite having a production potential of up to 51 million barrels of oil and 600 Bcf of gas. Managing these fields would require around $1.8 billion in investments, he added.

"For contractors that we've already granted authority, but are still slow, I'm sorry sir, legally, after five years we must take them back to the state and offer them to other contractors who are willing to work. This applies without exception," said Lahadalia.

According to analysts from S&P Global Commodity Insights, Indonesia has enjoyed renewed exploration success in 2023 and 2024, with some large gas discoveries in deepwater areas. The government is keen to accelerate the development of these resources, given the rapid economic growth of the country.

The overall investment landscape in Indonesia is highly fragmented, with over 100 upstream players including major international oil companies, small and mid-sized independents, and numerous domestic companies.

Pertamina has reportedly allocated a capital expenditure of $6.8 billion for its upstream and gas sub-holdings in 2025, as part of a larger capex commitment of more than $67 billion between 2025 and 2029. In this five-year plan, $40 billion is to be allocated to the upstream business, showing the continued focus by the national oil companies on oil and gas E&P activities, Commodity Insights analysts added.