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Indonesia entered 2025 with significant achievements in the energy sector, particularly oil and gas. In June 2025, national oil production reached 608,100 barrels per day (BOPD), exceeding the State Budget (APBN) target of 605,000 BOPD. Meanwhile, natural gas production also showed positive results, reaching 1.146 million barrels of oil equivalent per day (MMBOEPD), exceeding the APBN target of 1,005MMBOEPD (en.antaranews.com).
This achievement reflects the optimism and immense potential of Indonesia’s oil and gas industry. However, behind this surge in production, there are various challenges and risks that industry players must be aware of. From operational to financial perspectives, every step in the upstream oil and gas sector has significant implications.
Furthermore, this surge in oil and gas production is expected to drive the development of downstream infrastructure, such as new oil refineries in Kalimantan and Sulawesi, as well as modern gas processing facilities. Spillover from this development will open new business opportunities, including logistics, project contractors, drilling technology, and increasingly complex risk protection needs. In other words, the oil and gas industry is not solely focused on production; it also demands companies’ readiness to manage financial and operational risks to ensure investment security.
In this article, we will delve deeper into the opportunities that arise with increasing oil and gas production, the risks that lurk, and how insurance can be a strategic solution in mitigating risks and supporting the operational sustainability of oil and gas companies.
Current Trends in the Indonesian Oil and Gas Industry 2025
The surge in oil and gas production in Indonesia in 2025 will not occur suddenly. Several trends and strategies are driving this increase, which also serve as indicators of opportunities and risks for industry players.
1. Increasing Upstream Oil and Gas Production
The government is targeting oil production of 605,000 barrels per day (BOPD) and gas production of 1.01 million BOEPD. As of the first quarter of 2025, oil lifting had reached 96% of the annual target, while gas lifting had exceeded it. This trend indicates that upstream oil and gas projects, both managed by Pertamina and private and foreign operators, are operating efficiently and continuing to drive national output.
2. New Work Area Auction
2025 marks the launch of the first oil and gas working area auctions, including blocks directly offered to Pertamina. This opens up new investment opportunities and increases competition in the upstream sector. Investors prepared to mitigate risks will benefit from these projects.
3. Implementation of New Technology
Oil and gas operators are increasingly adopting the latest drilling technologies to improve production efficiency. These technologies help reduce costs, speed up the drilling process, and maximize the output of existing wells. However, the use of advanced technology also carries complex technical risks that require professional mitigation.
4. Downstream Infrastructure Development
In addition to focusing on the upstream sector, the government is encouraging the construction of new refineries and gas processing facilities in various regions, including Kalimantan and Sulawesi. This infrastructure will not only increase domestic processing capacity but also open up opportunities for the logistics sector, contractors, and oil and gas equipment providers.
5. Transition to Renewable Energy
In the medium term, Indonesia plans to launch B50 biodiesel and increase the use of renewable energy. While still in its early stages, this initiative demonstrates a global trend that requires oil and gas companies to be ready to adapt to regulations and the green energy transition.
6. Economic Spillover and Supporting Businesses
The surge in oil and gas production also impacts supporting sectors, such as construction services, logistics, and industrial technology. Companies involved in the oil and gas supply chain must be prepared for additional risks—from equipment failures and accidents to financial risks—that could disrupt projects if not addressed.
With the continued rise in oil and gas production and massive infrastructure development, industry players now face a business environment filled with both opportunities and risks. The surge in output opens up strategic opportunities for project expansion, investment, and technological innovation, but at the same time increases exposure to operational, financial, and legal risks.
Understanding this map of opportunities and challenges is crucial for oil and gas companies to make informed decisions, maximize profits, and mitigate the risks that lurk at every stage of production and project development.
Opportunities from the Surge in Oil and Gas Production
Indonesia’s surge in oil and gas production has opened up various strategic opportunities for oil and gas companies and their supporting sectors, which not only have a financial impact but also expand the industrial ecosystem:
- Economic Growth and Corporate Income
Increased oil and gas production significantly contributes to company revenue. This benefit extends not only to upstream companies but also to the downstream sector, contractors, and logistics services. This surge in production can strengthen a company’s financial position, facilitate business expansion, and enhance the investment’s value in the eyes of stakeholders.
- Project Expansion and New Contracts
With increased output, oil and gas companies have the opportunity to expand existing projects, manage new blocks, or secure additional contracts from both the government and the private sector. This also creates a need for new workers, consulting services, and the provision of advanced equipment, which directly support the growth of the oil and gas industry ecosystem.
- Foreign Investment and Joint Venture Opportunities
The surge in production has become a magnet for foreign investors. Multinational companies are interested in investing through joint ventures, production-sharing contracts, or strategic partnerships. This foreign investment not only supports production capacity expansion but also introduces international standards, modern technology, and improved safety practices.
- Technological Innovation and Digitalization
The demand for operational efficiency is driving the adoption of the latest drilling technologies, digital monitoring systems, and field automation. The adoption of advanced technology increases productivity, minimizes downtime, and reduces the risk of accidents. Furthermore, technology providers are gaining new opportunities to enter the Indonesian oil and gas market, creating a mutually supportive innovation ecosystem.
- Downstream Infrastructure Improvement
The construction of new oil refineries and gas processing facilities in Kalimantan, Sulawesi, and other strategic areas opens up business opportunities for contractors, logistics companies, and supporting service providers. This infrastructure not only increases domestic processing capacity but also strengthens national energy security and unlocks the potential for more competitive processed product exports.
- Spillover Impact to Supporting Sectors
The surge in oil and gas production has triggered positive spillover effects for various related sectors, such as transportation, construction, industrial technology, and professional services. Companies in supporting sectors have the opportunity to expand services, forge new partnerships, and increase their own production capacity. However, these opportunities require readiness to face additional risks, both operational and financial.
Risks Lurking in the Oil and Gas Industry
Even though various opportunities are wide open, the surge in oil and gas production also pose a significant risk that cannot be ignored. Every expansion or new infrastructure development carries the potential for problems, ranging from operational disruptions to significant financial impacts.
- Operational Risk
- Incidents such as accidents, leaks, explosions, or fire hazards can occur at any time.
- Expensive equipment failures, production disruptions, and downtime can result in billions of rupiah in losses.
- Human error, extreme weather, or unstable geological conditions can trigger incidents, especially in new areas or expansion projects.
- Financial Risk
- Unexpected costs resulting from emergency repairs, regulatory fines, or project delays can put a strain on a company’s budget.
- New companies or those with limited capital are particularly vulnerable to these financial risks, which can impact business continuity.
- Legal and Regulatory Risks
- Failure to comply with oil and gas regulations may result in legal action or administrative sanctions.
- Third-party claims, for example due to leaks or environmental impacts, can drain resources and damage a company’s reputation.
- Reputational Risk
- Oil and gas incidents can damage a company’s image in the eyes of investors, the government and the public.
- Reputational damage often has long-term consequences, affecting investor confidence and opportunities for new business partnerships.
- Risk Spillover for Supporting Sectors
- Failure of risk management in upstream oil and gas impacts contractors, logistics, support service providers, and the supply chain as a whole.
- Without proper mitigation, a single incident could disrupt the supply chain at large, causing losses not only to oil and gas operators but also to the entire supporting ecosystem.
Practical Tips for Mitigating Risks in the Oil and Gas Industry
The oil and gas industry is full of opportunities, but it also carries significant risks. Here are some steps that can help companies maintain safe operations and protect their investments:
- Implement Strict Safety Procedures
Ensure every worker receives regular Occupational Health and Safety (K3) training. Clear safety protocols for drilling, transporting, and storing fuel are essential to preventing accidents and incidents in the field.
- Perform Routine Maintenance and Inspections
Equipment, wells, pipelines, and production facilities must be inspected regularly. Preventive maintenance helps detect damage early and minimize operational disruptions.
- Planned Project Management
Realistic project scheduling and risk evaluation at each stage ensures resources are optimally utilized and reduces operational stress that can trigger human error.
- Use Advanced Monitoring Technology
Sensors, IoT systems, and real-time monitoring enable early detection of potential problems. Data analytics also helps predict equipment failures before major damage occurs.
- Diversification and Risk Protection
Managing a project portfolio by spreading risk across multiple locations or types of production helps a company remain stable if one project experiences problems. One important additional protective measure is have appropriate insurance, to cover financial risks due to unforeseen incidents.
- Periodic Evaluation and Review
Risks are constantly evolving as projects evolve and industry conditions evolve. Regularly review procedures, technologies, and mitigation strategies to ensure your company is prepared for new challenges.
Conclusion
Indonesia’s oil and gas industry is facing a surge in production that promises significant opportunities and complex risks. From project expansion opportunities, foreign investment, to the adoption of advanced technology, companies have the opportunity to grow and improve operational efficiency.
However, operational, financial, legal, and reputational risks cannot be ignored. Mitigation efforts through safety procedures, routine maintenance, robust project management, monitoring technology, and risk diversification are essential for companies to remain stable and prepared to face challenges.
An equally important strategic mitigation step is having the right insurance, supported by a professional broker. Insurance helps cover potential financial losses due to unforeseen incidents, ensures operational continuity, and meets regulatory requirements.
Facing the ever-growing complexity and risks in the oil and gas industry, having protection through oil and gas insurance is no longer just an option, but a strategic necessity for every company. Insurance helps cover potential financial losses due to unforeseen incidents, maintain operational continuity, and protect the company’s reputation with investors and business partners. By understanding project-specific risks and selecting the right policy, companies can focus on production and expansion with peace of mind.
📌 To find an oil and gas insurance solution that fits your risk profile and project needs, be sure to work with a professional insurance broker who understands the industry’s characteristics and is ready to tailor the best coverage.
📞 Contact the L&G Insurance Brokers team via WhatsApp at 0811-850-7773 For a free consultation, find the right oil and gas insurance coverage for your company. Don’t let unexpected risks disrupt valuable projects and investments—protect your assets and operations now!
