Oil and gas
BMI has reportedly modestly upgraded its production and consumption forecasts. This is based on expectations that the election of reform minded Joko Widodo as President is to have a positive impact on the country’s business environment and economy. BMI has also said that forecasts could surprise to the upside if Widodo is more successful than expected in battling entrenched interests in the oil and gas industry to revamp its operating environment.
Oil production is expected to fall between 2014 and 2023, this is due to the lack of large new projects to provide new crude oil output. For gas production, the downward trend is expected to continue this year but a turnaround is anticipated by BMI for 2016. This will come on the back of new major projects and also expectations that a more stable regulatory environment would allow long stalled final investment decisions to move ahead. This is also expected to bring online large projects that will help support longer term production in the country.
BMI has said that oil consumption could see a short term contraction from a likely cut in fuel subsidies and a roll back of oil for power generation. However, BMI has also said that the economic growth that President Jokowi could bring about would prompt a recovery and even spur further rises in demand in the long term. Gas consumption is set to trend upwards to 2023. According to BMI, not only will the switch of the power sector from diesel to gas be one of the key proponents of demand growth, the greater availability of gas from the start of LNG imports into the country will support consumption.
For the refining sector, there has been much government support for new capacity and modernisation of existing plants to meet rising demand. However, BMI does anticipate proposals to face financing difficulty and currently only expect the proposed Bontang refinery to move forward.
Turning to trade, BMI has said that growing oil demand in partnership with oil production decreases will see Indonesia become a net importer of crude oil and oil products. BMI has also said that while oil imports could fall with an expansion in domestic processing capacity, this will be more than compensated with an expected increase in its crude oil import demand. The growing domestic demand for gas is expected to reduce its export capacity to 2023. Hence, BMI has forecast LNG production to trend upwards form 2014, but does not expect LNG net export levels to return to its heyday in the 2000s.
BMI has commented that even though the Indonesian petrochemicals market faced slower rates of growth across a broad range of products in 2014, it has not deterred investment in new capacity and the country is now on track for strong growth in output.
Over the next five years, ethylene capacity is set to increase by 1.38 million tpy. This, BMI has said, should help sustain 800 000 tpy of extra polyethylene capacity and 700 000 tpy of ethylene glycol by 2018. Also, new crackers and propylene units at refineries will provide enough feedstock for 850 000 tpy of polypropylene production, BMI has said. Other new petrochemicals capacities include 250 000 tpy of PVC.
Edited from report briefsby Claira Lloyd
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