The Role of Oil and Gas Industry in Indonesia | Natural Gas | Petroleum

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The role of oil and gas industry in indonesia
  The Role of Oil and Gas Industry in Indonesia Oil and gas industry in Indonesia has been starting since 1900 and still continuing until today. Back then before 2000, Indonesia energy consumption based on oil had been so prevalent that it was considered as the backbone of Indonesia economy. It was estimated that more than 70% Indonesia income were coming from oil and gas exploitation. Unfortunately, the oil and gas industry currently isn’t the majority of Indone sia revenue anymore. The production of oil has been steeply declining, whereas the gas production may be at the peak right now. Even though it is declining, oil and gas industry still possess a great role in Indonesia economy. The role of oil and gas industry can be divided into two major segments. First internal and external role. As internal contribution, oil and gas industries can be divided into six segments. Internal role of it lies on establishing the foundation structural economy to build welfare for society. It comprises of fiscal contribution, job creation and skill building, infrastructure investment, social and community benefits, environmental preservation and  backbone of Indonesia development. First, fiscal contribution. Indonesian oil and gas sector on a regular basis a significant contribution to the Indonesian economy through the world's export earnings and foreign exchange reserves. However, its contribution has been declining over the last decade in terms of percentage to Indonesia GDP.   Acceptance state one of which comes from non-tax revenues (non-tax), which includes revenue from the oil and gas sector. Based on the results of recapitulation, the ratio of oil and gas revenues to the state budget dropped dramatically from 2006 to 2017. The peak ratio was in 2006 with a percentage of 24.8% (nearly a quarter of state revenues from oil and gas) and the lowest in 2017 (draft) 3.6%. This is because the production and price of oil and gas continues to decline. Here is a graph of oil and gas revenues. This decrease is due to the world oil and gas prices which dropped significantly after the year 2013 experienced an increase in the height ranges 110 US $. If seen from their constituent components, the manufacturing industry, trade and agriculture, is still the largest contributor to Indonesia's GDP. However, this figure is certainly not showing the overall role of the oil and gas sector for the economy, since oil is also a driver of other sectors, especially the manufacturing industry, transportation, electricity, and so on. 21.0 24.8 17.6 21.6 14.8 15.3 16.0 15.4 14.1 13.7 4.4 3.8 3.6 - 5.0 10.0 15.0 20.0 25.0 30.0    P   e   r   c   e   n   t   a   g   e ,   % Year Percentage of Oil and Gas Income Over Indonesia's GDP 103.8158.1124.8211.6125.8152.7193.5205.8203.6211.778.268.763.70501001502002502005200620072008200920102011201220132014201520162017    I   n   c   o   m   e ,   T   r   i    l    l   i   o   n   R   u   p   i   a    h Year Income from Oil and Gas   Final energy consumption by type, during the years 2000- 2014, was dominated by oil fuel (gasoline, diesel oil, IDO, kerosene, fuel oil, avtur and avgas) but with the lowest growth compared to other energy. During this period, the total oil fuel consumption increased from 315 million BOE in 2000 to 308 million BOE in 2014, rose with average of 0.18% per year. Consumption of natural gas in period 2000-2014 increased with an average growth of 2.6% per year. The small growth of natural gas consumption as final energy was caused by the limitation in national gas network infrastructure. Second, job creation and skill building. Oil and gas possess role in providing jobs directly and indirectly attributable to its industrial operations. Drilling operations doesn’t only unleash opportunity for petroleum engineer, but also those related to supporting activities and forward activities. To quantify the number of jobs created by oil and gas industry, we can utilize input output analysis. Measuring economic impact can be done using operational impact and capital investment impact analysis. Operational impact calculates the ramification of economy due to  purchases of intermediate input and payments of labor compensation. Capital investment impact measures the impact due to its investment in new structures and equipment. To look at that, we are going to break down the oil and gas industry into three sections, which are upstream, midstream, and downstream. After that we are going to scrutinize the derivative industry that desperately require input from oil and gas industry. Scope Activities Industry related Upstream Exploration, drilling and production Electricity, transportation, logistics, engineering  procurement and construction Midstream Oil and gas processing, storage and transportation such as piping, LNG, CNG Construction, transportation, oil refinery manufacturer,  pipeline manufacturer, equipment such as compressor and pump manufacturer  Downstream Oil refineries, petrochemical plants,  petroleum product distributors, retail outlets and natural gas distribution. Construction, transportation, logistics and supply chain, chemical product, cement, fertilizer, steel Oil and gas industries and its derivative industries carry impacts to Indonesia through the creation of workforce and supply chain development. 1.   Creating workforce development The existence of oil and gas industry in certain area could create workforce for local communities and suppliers. For example, more than half of BP workforce in Tangguh is Papuan. This is a direct result of internship and apprentice programs that focus on training graduates from Papua and Papua Barat. BP, as the leading oil company in that area, is committed to reaching an 85% Papuan workforce by 2029. As part of BP development, they have set a target of sourcing 38% of their services and project materials from local suppliers. This is just one sample case from BP, fortunately, there are a lot of oil company resulting the same thing. Area such as Arun, Rokan, Cepu and Balikpapan has been undergoing the same massive job opportunity since the production of oil and gas in that location. 2.   Supply chain development Oil and gas industry also provides raw materials needed for others industries as their feedstock to be further processing, such as petrochemical (polymer and fertilizer industry), steel, and electricity industry. Fortunately, more than 50% supply chain development will be felt by local  businesses. Why? Because based on the regulation created by industrial minister, there are requirements regarding the minimum level of local content used on the oil and gas industry. This directly affect more local procurement company exist to supply equipment to oil and gas. Not only sales, but also job opportunity will be affected by this industry.   Oil and gas industry local content from 2006 until 2015 Source : According to data published by Katadata, one of the leading oil and gas news  provider, since 2006 until now, the achievement of Domestic Component Level (DCL) has  been constantly increasing. In 2006, the use of domestic components in the upstream oil and gas reached 43 percent. As for 2015, the use of domestic components to June reached
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