Position of Oil and Gas in the National Economy
Oil and gas industry still plays a vital role in the Indonesian economy, despite the current global trend toward renewable energy. Oil and gas are not only the primary energy source for industry, transportation, and households, but also a significant contributor to state revenue through taxes, royalties, and dividends from strategic state-owned enterprises like Pertamina. Furthermore, oil and gas are a pillar of fiscal stability and the trade balance, given the substantial domestic demand and the contribution of oil and gas exports to international markets.
In line with the government’s goal of maintaining national energy security, investment in the upstream, midstream, and downstream oil and gas sectors is crucial. Strategic projects, from new block exploration and refinery construction to LNG development, require strong financing support. In this context, the government’s fiscal policy of transferring IDR 200 trillion to commercial banks provides a breath of fresh air. Greater liquidity in the banking sector is expected to strengthen access to credit, enabling more aggressive financing of oil and gas projects.
With such a strategic role, the sustainability of the oil and gas industry is not only crucial for economic growth but also serves as the foundation for the national energy transition towards a future clean energy era.
The Impact of Liquidity on Oil and Gas Project Financing
The government’s policy of channeling Rp 200 trillion (approximately US$10.7 billion) into commercial banks represents a significant boost for the oil and gas industry. Increased banking liquidity will significantly increase credit capacity for the energy sector, particularly oil and gas. Oil and gas projects often face funding constraints due to their high-risk, long-term nature, and the significant investment required from exploration to production.
This additional liquidity will enable banks to more aggressively disburse credit, both in the form of investment loans for refinery construction and LNG terminals, as well as working capital for oil and gas company operations. National oil and gas companies like Pertamina, as well as private and multinational corporations, will have better access to competitive financing facilities.
Furthermore, banks can collaborate with international financial institutions to strengthen funding structures, preventing delays in national strategic projects. In the long term, this policy has the potential to accelerate the realization of national oil and gas production targets, which have tended to stagnate in recent years.
With a smoother flow of financing, the oil and gas industry is expected to increase its contribution to energy security, create jobs, and strengthen state revenues. This new liquidity is a crucial catalyst for oil and gas growth from 2025 onward.
Exploration & Exploitation of New Oil and Gas Blocks
Exploration and exploitation of new oil and gas blocks is one of the government’s strategic priorities in maintaining national energy security. Over the past few years, Indonesia’s oil production has steadily declined due to natural decline in mature fields, while the discovery of new reserves has been suboptimal. With the additional liquidity of Rp 200 trillion from fiscal policy, the opportunity to revive oil and gas exploration activities is greater.
Fresh funds from banks can be channeled to support investments in seismic surveys, exploratory drilling, and new field development. Potential projects in Natuna, Papua, and other deepwater areas are both costly and carry significant risks, so more flexible financing from banks would be very helpful.
For national oil and gas companies like Pertamina and foreign companies, this support provides additional incentives to accelerate work plans. This makes the target of increasing oil production to 1 million barrels per day by 2030 and gas to 12 billion standard cubic feet per day (BSCFD) more realistic.
In addition to strengthening domestic energy availability, exploration of new blocks will also open up job opportunities, increase regional economic activity, and strengthen Indonesia’s position in the global energy supply chain.
Midstream & Downstream Projects (Refinery, LNG, Distribution)
In addition to exploration and production (upstream), the development of the midstream and downstream oil and gas sectors is also a key focus in strengthening national energy security. Midstream projects encompass the construction of energy transportation infrastructure such as pipelines, terminals, and storage facilities, while downstream projects encompass refinery processing, fuel distribution, and LNG development for domestic and export needs.
The additional liquidity from the Rp 200 trillion policy diverted to commercial banks is expected to accelerate the implementation of these strategic projects. For example, the construction and modernization of national oil refineries has long been a priority but has often faced funding constraints. With greater credit support, refinery projects in Balikpapan, Tuban, and Cilacap can proceed more quickly, increasing domestic processing capacity and reducing dependence on fuel imports.
Furthermore, LNG projects and energy distribution infrastructure will directly benefit from the availability of new financing. The development of LNG terminals and gas distribution networks to industrial and urban areas will strengthen national energy diversification.
In the long term, strengthening the midstream and downstream sectors will not only support energy supply stability but also create job opportunities, increase domestic added value, and strengthen Indonesia’s competitiveness in the global energy market.
The Role of National & Multinational Oil and Gas Companies
The Indonesian oil and gas industry is inextricably linked to the significant role of both national and multinational companies. At the national level, Pertamina serves as the main backbone, spanning exploration, production, refinery processing, and fuel distribution throughout the country. Pertamina also holds strategic mandates for major projects, including the construction of new refineries, the development of liquefied natural gas (LNG), and integrated energy projects. With an additional Rp 200 trillion in liquidity in commercial banks, Pertamina will have stronger access to financing to accelerate the realization of these projects.
Meanwhile, multinational oil and gas companies continue to play a vital role, particularly in the exploration of new blocks, which require significant capital, advanced technology, and global experience. Companies such as Chevron, ExxonMobil, TotalEnergies, and MedcoEnergi (as national private companies with international networks) can leverage the availability of new funding to expand their investments in Indonesia.
Collaboration between domestic and foreign companies also has the potential to deepen, given the significant investment needs in the oil and gas sector. This synergy will not only accelerate the growth of national oil and gas production but also support technology transfer, human resource capacity building, and broad economic multiplier effects.
Thus, the dual role of national and multinational companies will be a key factor in determining the success of the Indonesian oil and gas industry in this new era.
Major Risks & Needs of Oil and Gas Insurance
The oil and gas industry is one of the highest-risk sectors in the world. Every stage, from exploration and drilling to production and distribution, carries the potential for significant losses, both financially and environmentally, and safety-wise. Deepwater drilling operations, for example, risk explosions, oil leaks, and billions of dollars in equipment damage. Similarly, oil refineries and LNG terminals are prone to fires, explosions, and operational disruptions due to technical and natural factors.
Therefore, the need for insurance in the oil and gas industry is absolute. Products such as Energy Package Insurance, Control of Well Insurance, Property All Risks (PAR), Business Interruption, Marine Cargo, and Liability Insurance are crucial instruments in protecting companies from significant losses. Insurance not only provides financial protection but is also a crucial requirement for obtaining funding from banks and investors.
This is where the role of an insurance broker like L&G Insurance Broker becomes vital. With extensive experience managing energy and oil and gas risks, L&G is able to design comprehensive insurance programs, negotiate the best terms with insurance companies, and assist clients through the claims process. With the right protection, oil and gas companies can focus more on project execution, improve efficiency, and strengthen their competitiveness amidst global uncertainty.
Challenges: Global Oil Prices, Geopolitics, Energy Regulation
The Indonesian oil and gas industry faces significant ongoing challenges. One key factor is the highly volatile global oil price. Price movements are influenced by international market dynamics, including OPEC+ policies, changes in global energy demand, and developments in renewable energy technology. This price volatility directly impacts the certainty of oil and gas investment in Indonesia, as it reduces investor interest when prices are low and creates long-term uncertainty.
Furthermore, geopolitics is also a significant factor. Conflicts in the Middle East, the Russia-Ukraine war, and tensions in the South China Sea have the potential to disrupt the global energy supply chain, ultimately impacting Indonesia in terms of both prices and supply. This geopolitical situation demands a strategy of supply diversification and increased domestic production.
Another challenge is domestic energy regulation. The Indonesian government faces a dilemma between encouraging oil and gas investment for energy security and accelerating the transition to clean energy. Regulatory changes related to taxation, profit sharing (PSC), and environmental regulations often create uncertainty for investors.
To face these challenges, the oil and gas industry requires consistent policies, investment incentives, and strong financial support. With sound risk management, including insurance protection, the oil and gas sector can remain a vital pillar in maintaining national energy security.
Oil and Gas Technology Investment & Efficiency
Amidst intense global challenges, investment in oil and gas technology is key to the industry’s sustainability. Oil and gas companies are required to continuously innovate to improve operational efficiency, reduce production costs, while maintaining occupational safety and environmental sustainability. Advanced exploration technologies such as 3D and 4D seismic surveys, horizontal drilling, and enhanced oil recovery (EOR) play a critical role in discovering new reserves and optimizing existing fields.
Furthermore, digitalization is beginning to be widely implemented through big data analytics, IoT, and artificial intelligence (AI) to monitor equipment condition, predict failures, and increase productivity. The use of these technologies has been proven to reduce downtime, extend asset lifespan, and significantly lower operational costs.
Investment in environmentally friendly technologies is also increasing, such as emissions management systems, gas flare utilization, and carbon capture and storage (CCS) implementation. This aligns with Indonesia’s commitment to reducing carbon emissions and accelerating the energy transition.
With an additional Rp 200 trillion in liquidity in the banking sector, funding opportunities for the adoption of oil and gas technology are increasingly open. Companies can access financing more easily for innovative projects, enabling the Indonesian oil and gas industry to compete globally with higher efficiency standards.
Risk Management, Insurance, and the Role of Insurance Brokers
The oil and gas industry is a high-risk sector encompassing technical, financial, environmental, and geopolitical aspects. Every project—whether exploration, refinery construction, or energy distribution—can face the potential for significant losses due to accidents, equipment failures, natural disasters, and even lawsuits. Without a sound risk management strategy, these losses can disrupt cash flow, undermine investor confidence, and even halt company operations.
This is where insurance plays a vital role. A comprehensive oil and gas insurance program encompasses a range of coverages, from Energy Package Insurance, Control of Well, Construction/Erection All Risks (CAR/EAR), Marine Cargo, Property All Risks (PAR), Business Interruption, to Liability Insurance. This protection scheme not only safeguards assets and projects but is also a crucial prerequisite for obtaining financing from banks and international investors.
However, designing the right insurance program requires a high level of expertise. This is where insurance brokers like L&G Insurance Broker provide added value. With extensive experience in the energy and oil and gas sectors, L&G helps companies select appropriate insurance products, negotiate the best terms with insurance companies, and ensure a smooth claims process. With L&G’s support, oil and gas companies can focus on operations and expansion, while significant risks are professionally managed.
Oil and Gas Industry Outlook 2025–2030
The outlook for Indonesia’s oil and gas industry in the 2025–2030 period stands at a crucial crossroads between maintaining energy security and supporting the global energy transition. The government is targeting oil production of 1 million barrels per day and gas of 12 BSCFD by 2030, a significant ambition that requires massive investment across the upstream, midstream, and downstream sectors. With the fiscal policy of Rp 200 trillion in funds flowing to commercial banks, funding opportunities for oil and gas projects have expanded, making this target more realistic.
Furthermore, the continued rise in domestic energy demand due to economic growth, industrialization, and urbanization will maintain the relevance of oil and gas as a primary energy source in the medium term. Meanwhile, the global trend toward clean energy demands that the Indonesian oil and gas industry be more adaptive through the adoption of environmentally friendly technologies and decarbonization strategies, including the implementation of Carbon Capture and Storage (CCS).
Collaboration between the government, national oil and gas companies, the private sector, and international partners will be key. With sound risk management and adequate insurance protection, Indonesia’s oil and gas industry has the potential not only to strengthen national energy security but also to become a significant player on the global energy landscape in the coming decades.
Conclusion
The government’s policy of transferring Rp 200 trillion from Bank Indonesia to commercial banks represents a significant milestone for the Indonesian oil and gas industry. This additional liquidity opens up greater opportunities for funding upstream, midstream, and downstream projects, while accelerating the realization of national energy security targets. Amidst the challenges of fluctuating global oil prices, geopolitical dynamics, and demands for green energy regulations, Indonesian oil and gas industry has the opportunity to grow stronger with more competitive financing support.
However, this significant opportunity must also be balanced with sound risk management. Every oil and gas project carries significant potential risks that require comprehensive protection through an insurance program. This is where the role of an insurance broker like L&G Insurance Broker becomes crucial. With specialized experience and expertise in the energy sector, L&G is ready to help oil and gas companies design the best risk protection, negotiate policy, and accompany the claims process.
It’s time for the oil and gas industry to capitalize on this momentum. Don’t just be a bystander, but be part of Indonesia’s energy revival. Contact L&G Insurance Broker for risk management and insurance solutions that can support the success of your projects in this new era.
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