Indonesian oil & gas sector and the role for Indonesian Development

Oil and GasAnindya Sharani 350276Muhammad Bima Samudera 350244Muhammad Heickal Pradinanta 350168Rozano Aulia Imansyah 350282Valdo Dellazepta 350096

OIL

Exporter Period

●Indonesia’s oil industry is one of the oldest, discovered in 1883○ Koninklijke Nederlandsche Maatschappij tot Exploitatie van Petroleum-bronnen in

NederlandschIndië, 1890

●Royal Dutch Shell, 1907○ In 1911, Indonesia contribute to 4% of World’s oil production

●government control of oil increases post-independence, creating contract with foreign oil companies and long term planning

○ Indonesia joined opec in 1962

●Pertamina was founded in 1968 from the merging of Pertamin, Permina, and Permigan

○ The production-sharing contract, among the toughest in the world

Exporter Period

Exporter PeriodAnnual oil production in Indonesia peaked in 1977 at over 600 million

barrelsPrice of crude oil was $14 per barrel, significant increase since 1973

Prices reached $35 per barrel in 1981oil exports skyrocketing at $15 billion (70% of total export earnings)

However, production decreases starting 1982, down to 460 million barrels

Crude oil price was decreased to $29 per barrel

Market collapse in 1986, OPEC production plummeted from 50% to 29%

Crude oil price tumbled to $10 per barrel

The oil industry recover slowly but never catch up to the previous condition

Importer Period

http://www.indexmundi.com/energy.aspx?country=id&product=oil&graph=imports

Importer Period

https://edorusyanto.wordpress.com/2014/09/08/fakta-pertama-jumlah-motor-terus-meningkat/

Importer Period

Importer Period

http://marketrealist.com/2015/01/crude-oil-market-key-overview/

Importer Period

Oil Subsidy- Oil subsidy was implemented on the beginning of the new order era

- Based on the low purchasing power of indonesia people and at that time indonesia still had many oil reserve

- Crude oil was used as the main source of national income

- The presence of VAT took over the main source of national income

- in 2015 Indonesian government spent Rp. 291.1 Trillion (+- $23 Billion) for oil subsidy

Subsidy trend

Why the subsidy was getting higher?

Triggered by the failure of the government to make a convenient public transportation

Vehicle boom in Indonesia

Increased in the price of the imported oil

Subsidy AnalysisThis past 10 years the government has spent approx Rp. 1,635

trillion for oil subsidy

Oil subsidy is for the rich people

Rather than oil subsidy the government should use the money to productive sector

Infrastructure development would be more appropriate rather than the oil subsidy

Where the subsidy goes?On the beginning of Jokowi era he took a brave action by cutting the

budget for oil subsidy and increasing it price

ConclusionThe Royal Dutch Shell bring about the start of Indonesia’s oil export

eral

Oil production growth in Indonesia was supported by the dependency of other nations to OPEC.

Oil industry had its peak performance back in the mid 20th century

Oil subsidy since the beginning of the new order era was proven unappropriate to continue in this present condition

Money from oil subsidy should be transferred to the productive segment

GAS

The role of gas for Indonesian Development

Energy Sector (Oil and Gas)

Sources of energy for Domestic

Sources of Government’s

Income

Feedstock to strategic industries

Indonesian Development

Indonesian gas Production and Consumption

Indonesia’s export of gasIndonesia's gas production has always been directed towards export

markets

Indonesian Government attempts to enlarge domestic uses of gas

Long-term export contracts that were signed in the early and mid-2000s are priced below market prices

The domestic demand cannot be satisfied by domestic production

Indonesian LNG Export

Indonesian LNG contract

Subsidy of Natural GasIndonesian government give subsidy in form of tax incentive.

In 2008, $ 245 Million or Rp 2.37 Trillion was given to oil and gas companies as tax incentive.

How to receive tax incentives?The company must be operate under any one of the following

conditions:Oil refinery with priority for local demand.

Natural Gas refinery and processing business to produce LNG and LPG.

Lubricants manufacture.

Organic basic chemicals industry originating from crude oil and natural gas.

What are requirements to receive tax exemption?

Taxpayer that may be entitled for tax exemption are new corporate that fulfill the following criteria:

Operate in a pioneer industry

New capital investment plan of at least Rp 1 Trillion.

Will deposit minimum 10% of total investment plan to Indonesian bank.

Have status of validated legal entity in Indonesia, at most 12 months before the effective date of tax exemption.

How many period is the effective tax exemption?

The tax exemption on income tax payable for maximum 10 fiscal years and minimum 5 fiscal years, based on commercial production commences.

After the end of exemption periods, taxpayers will be entitled to a 50% reduction on income tax payable for subsequent 2 fiscal years.

The Consumption

Utilization of Natural Gas

Year to Year Comparison

What the future holds?

Will Indonesia becomes an Importer in 2025?

No, because Indonesia is the 10th largest natural gas producing country.

Will Indonesia becomes an Importer in 2025?

Yes, if :Government did not take any action on exploring new untapped resource.

Predominance of natural gas exports under long-term contracts.Indonesia’s inadequate distribution infrastructure.

Sourceshttp://www.gbgindonesia.com/en/main/business_updates/2015/upd_will_indonesia_become_a_net_importer_of_natural_gas_by_2020_11156.php

IGA Presentation

Badan Pengkajian Dan Penerapan Teknologi. Outlook Energi Indonesia 2009. 2009. Jakarta. BPPT-Press

Deloitte. Oil and gas taxation in Indonesia: Deloitte taxation and investment guides.

Sources - Cont.http://ichsaneljufri.blogspot.com/2013/06/sejarah-lahirnya-subsidi-bbm.html

http://countrystudies.us/indonesia/73.htm

http://www.ipa.or.id/overview/index/10

http://www.indonesia-investments.com/

Additional Information