Indonesia Oil and Gas Market Outlook to 2028

Indonesia Oil and Gas Market Overview

• The Indonesia Oil and Gas market size in terms of production volume is 637 thousand barrels per day primarily driven by domestic demand for both oil and natural gas, which surpasses current production levels. Economic growth and industrial expansion contribute to the rising energy needs. Government initiatives, such as increasing refinery capacities and promoting upstream exploration, play a key role in driving market growth.

• The market is dominated by several key cities and regions, particularly Java and Sumatra, where major production fields are located. Java hosts major refining and petrochemical infrastructure, while Sumatra houses significant natural gas and crude oil reserves. These regions dominate due to their long-standing production history, government support, and access to both domestic and international transportation networks, which facilitate export activities.
• As part of its Gas Infrastructure Master Plan, the Indonesian government is expected to continue its investment in pipeline networks throughout 2024. A substantial budget, exceeding USD 5 billion, has been earmarked for expanding gas transmission lines to improve connectivity between gas-producing regions and urban centers, reducing transportation bottlenecks and ensuring steady gas supply for industrial use.

Indonesia Oil and Gas Market Segmentation

By Sector: The market is segmented by upstream, midstream, and downstream operations. Each sector plays a crucial role in the overall market, with upstream operations covering the exploration and production of oil and natural gas, midstream involving transportation, and downstream focusing on refining and distribution. Upstream, the crude oil sub-segment dominates this segment due to the focus on increasing exploration in existing oil fields and discovering new offshore reserves.

By Location: The market is also segmented by location of operations, covering onshore and offshore exploration and production. Onshore locations, such as Sumatra and Java, continue to dominate due to their established infrastructure and proximity to refineries and processing plants. This segment enjoys substantial market share as it provides easier access for logistical operations and lower operational costs.

Indonesia Oil and Gas Market Competitive Landscape

The market is dominated by major local and international players, which control a large share of the market due to their extensive resources, government ties, and operational expertise. Some key players in the market include.

Indonesia Oil and Gas Market Analysis

Market Growth Drivers

• Increased Domestic Energy Demand: Indonesia's growing population, projected to reach over 277 million in 2024, along with rapid industrialization, is driving demand for energy, particularly oil and gas. This growing demand for energy sources to fuel industries, transportation, and power generation is pushing the development of both upstream and downstream sectors in the oil and gas market.
• Government's Push for Energy Security: The Indonesian government's target to reduce reliance on imported oil has catalyzed investment in local exploration and production. The country's Ministry of Energy and Mineral Resources has set ambitious plans for expanding production, aiming to achieve self-sufficiency in oil by 2030.
• Infrastructure Expansion for Gas Transmission: Gas infrastructure development is playing a pivotal role in driving the market, with projects aimed at expanding the transmission network from major gas-producing regions like Sumatra to high-demand areas such as Java. The 2024 state budget includes substantial funds for improving gas pipeline infrastructure, ensuring better distribution and reducing transportation costs.

Market Challenges

• Declining Production Rates in Mature Fields: Many of Indonesias oil fields, such as those in Sumatra, are aging and experiencing declining production. In 2024, it is anticipated that production will continue to drop by several thousand barrels daily from these mature fields, which presents a significant challenge to overall oil output.
• High Cost of Exploration in Remote Areas: A portion of Indonesia's untapped oil and gas reserves are located in deep-water regions and remote areas such as East Kalimantan. Exploration and extraction in these regions involve high operational costs, which are expected to increase further in 2024 due to inflation and higher global energy prices.

Indonesia Oil and Gas Market Future Outlook

The Indonesia oil and gas industry is poised for continued growth over the next five years, driven by several key factors. Government policies aimed at increasing crude oil production, alongside investments in deepwater exploration, are expected to expand production capacity.

Future Market Opportunities

• Increased Focus on Renewable Energy Integration: In the next five years, Indonesia will actively integrate renewable energy sources into its oil and gas industry to reduce carbon emissions. The government aims to have 10% of its energy needs met through renewable sources by 2029, which will be combined with gas-fired power plants to create hybrid energy solutions, reducing reliance on fossil fuels while meeting energy demands.
• Investment in CCS Technologies: Over the next five years, Indonesia is expected to become a leader in carbon capture and storage (CCS) technology in Southeast Asia. By 2029, the government plans to invest over USD 10 billion in CCS projects, aiming to reduce carbon emissions from oil and gas operations by over 20 million tons annually, contributing to the country's emission reduction targets.