Economic View

On leveraging new technologies and regional partnerships to ensure the sector continues to expand

What strategies could further increase Indonesia’s oil and gas production capacity?

ROBERTO LORATO: Over the past few years we have seen a fall in production of oil and gas and a rise in consumption. Although Indonesia ranks 11th in the world in terms of gas production, with proven reserves of 96trn cu feet, the gas industry is under pressure from more competitive markets, while the oil industry has its own distinct challenges. Nevertheless, in recent years the government has taken significant measures to boost the competitiveness of these industries. Sector players that are strategically navigating the market have been fortunate enough to experience growth and profitability by employing low-cost production methods. Indonesia still has a host of unexplored or minimally explored regions, which offer opportunities for expansion.

Companies such as ours that have a long history in Indonesia have experienced a host of changes in the country’s energy sector. We realise that to not only be successful in this market, but also to continue to grow and expand, we must be a fully integrated energy business that has a diverse portfolio of assets and ongoing projects. For this reason, it is important to expand beyond one segment of the energy market. If we invest in oil, gas, geothermal, hydropower and mining, then even if some commodity prices are down there will be other segments to keep growth at a steady level overall.

Where do you foresee growth in the South-east Asian oil and gas market, and is there potential for Indonesian companies to enter other markets in the region?

LORATO: As South-east Asia rapidly becomes more developed the need for energy service provision will continue to grow. Expanding the scale of production only works well if there is an integrated supply chain. This infrastructure is developing well in South-east Asia. We have already successfully entered markets beyond Indonesia, and have interests in Malaysia, Singapore, Vietnam and Thailand. There is still great potential for exploration activity in this region and, given that it is growing as a key economic bloc, it is imperative that established energy players are able to serve this dynamic market well. We believe there are opportunities for possible joint ventures and concessions with other regional players.

An important ancillary industry will be clean energy sources. ASEAN has made certain commitments in this area and some countries, including Singapore, are heavily focussed on resource protection. The expansion of geothermal, hydroelectric and solar power will mean that South-east Asia can reduce its reliance on fossil fuels and a transition to a more diverse energy offering. While companies in the region should work together to serve the energy market, there are also significant opportunities for joint ventures and acquisitions in the Middle East, Africa and Central America – such as our recent acquisition of key energy players, which positions us as a competitive regional player.

How are new technologies influencing the development of the energy sector in Indonesia?

LORATO: Around the world new technologies and digital advancements are already changing the oil and gas industry. By using advanced sensors and devices to increase data points, for example, exploration is made easier, more predictable and more accurate. New technologies in oil and gas are already allowing for optimisation of equipment usage and ultimately increasing production capacity.

Additionally, as mitigating the effects of climate change is a key priority for Indonesia’s sustainable development, it is imperative for private sector players to offer modern solutions to these problems. To this end, independent clean power technologies are being introduced across Indonesia to reduce reliance on coal-fired power plants and to shift our country’s energy usage to renewable resources. The Sarulla geothermal power development in Sumatra is one example of collaboration between Indonesian, Japanese and US firms to leverage modern technologies and offer new sources of energy.

For commodity-reliant enterprises to grow and expand, they must be fully integrated energy businesses with diverse portfolios of assets and ongoing projects. We have invested in oil, gas, geothermal energy, hydropower and mining. As a result, even if some commodity prices are down, there will be other segments to keep growth at a steady level overall