Energy Investment Drops Due to World Oil Prices

World oil prices affect the performance of the energy sector investment. The Ministry of Energy and Mineral Resources (ESDM) noted that investment in the strategic sector continued to decline since 2014 to the third quarter of 2018.

In 2014, energy sector investment was recorded at USD 33.5 billion. Then, successively dropped to USD 32.3 billion in 2015, USD 29.7 billion (2016), and USD 27.7 billion (2017). In fact, as of the third quarter of 2018, the realization of investment in the sector only reached USD 15.2 billion. That figure is only 40.86 percent of the energy sector investment target this year worth USD 37.2 billion.

ESDM Minister Ignasius Jonan said that fluctuations in energy sector investment, especially oil and gas, depending on world oil prices. Since the end of 2014, world oil prices have indeed continued to decline, thus affecting the realization of domestic energy investments.

In December 2014, world oil prices were still at USD 61.23 per barrel. This figure dropped to the end of December 2015 which touched USD 37.04 per barrel. “If you look at the cycle, investment is mainly done after high oil prices because there is nothing that can be done about it,” he said at the State Secretariat office complex on Wednesday (10/24).

Meanwhile, ICP (Indonesian Crude Price) or Indonesian oil prices in December 2017 managed to rise to touch the figure of USD 60.90 per barrel. According to him, energy investment, especially oil and gas, will rise again in 2019 and 2020.

Because there is an efficiency in investment spending by investors. “Oil and gas upstream plan (POD) was initially USD 10 billion to USD 12 billion if negotiations could be saved to USD 1 billion to USD 2 billion. Electricity is the same. If the tariff is fair or reasonable, investment will also decrease, “he explained.

He gave an example of a PLTB (wind power plant) in Sidrap with a capacity of 75 MW. The initial investment swallowed USD 160 million at a rate of around USD 11 cents per kWh. Then, investors propose to increase the capacity by 50 MW with electricity rates of only USD 6.8 cents per kWh. “Almost half. “The investment must also go down,” he said. The realization of ESDM’s investment value is mostly from the oil and gas sector worth USD 8 billion.

Followed by the electricity sector reached USD 4.8 billion and the mineral and coal (minerba) sector worth USD 1.6 billion. Finally, the EBTKE sector (new, renewable and energy conservation) reaches USD 0.8 billion.

“Electricity must have dropped its investment. If it continues to increase, it will build how much (generator, Red). But, after this, it will be flat. If oil and gas depend on world prices. We cannot control, “he explained.

ESDM Ministry’s Director General of Electricity Andy Noorsaman Sommeng said that global investors still have a desire to invest in the electricity sector. “The proof is that there are still many PLN issuing global bonds,” he added.

The sector’s total investment up to the end of the year is predicted to exceed USD 6 billion.

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