Indonesia Project Logistics Annual Meeting 2015

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Challenges to the Indonesian Economy: Global Oil Price & US Normalization

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Governor of Indonesia’s central bank (Bank Indonesia) Agus Martowardojo said that there are two main global challenges that are being faced by Southeast Asia’s largest economy and which can impact negatively on the nation’s economy. These challenges are the low global oil prices (which have fallen below USD $50 per barrel) and the monetary policy normalization of the US Federal Reserve amid the structural economic recovery of the USA. This policy involves higher US interest rates (expected in the second half of 2015) and a bullish US dollar.

Global oil prices have fallen dramatically in recent times (from USD $115 per barrel in June 2014 to below USD $50 per barrel at the start of 2015) on growing oil production – brought about by the ‘US shale gas & oil revolution’, recovering crude oil output in Iraq and Libya, and the reluctance of the OPEC to set a lower collective oil production cap – in combination with slowing economic global activity in China, India, Europe and Japan. The US shale gas & oil revolution, which started around 2009, has triggered speculation that the world’s largest economy may turn from being the world’s biggest energy importer into the world’s biggest energy exporter, hence threatening the position of Saudi Arabia and several other Middle Eastern countries. Therefore, conspiracy theories suggest that the OPEC’s decision to maintain oil production volumes is actually a move to eliminate their new US competitors by pushing the oil price down. Although this strategy would also hurt state income of the OPEC countries, oil production costs in Saudi Arabia and several other Middle Eastern OPEC-member countries are much lower than oil production costs in the US (and Russia). The global average of oil production costs (per barrel) is estimated at USD $51. Whereas it requires USD $65 per barrel to produce shale gas in the USA and USD $50 per barrel of oil in Russia, oil production costs in the major Middle Eastern oil producing countries are estimated at only USD 27 per barrel, thus giving them enough room to push down global oil prices. If indeed the current low oil prices are the result of international competition for (oil) market dominance then oil prices are not expected to swing back into a rising trend anytime soon, particularly not when global economic growth remains sluggish.

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Regarding the global economy, markets were not pleased to see the International Monetary Fund (IMF) cutting its economic growth outlook. The Washington-based institution expects the global economy to grow 3.5 percent (y/y) in 2015 and 3.7 percent (y/y) in 2016, down from 3.8 percent (y/y) and 4.0 percent (y/y), respectively, in its previous World Economic Outlook (October 2014), citing weak investment, slowing trade and declining commodity prices as well as poorer economic prospects in China, Russia, the Eurozone, and Japan. On a positive note, the IMF’s growth forecasts imply an acceleration of global economic growth from 2014 when the world economy expanded 3.3 percent (y/y). Global economic growth is primarily supported by ongoing improvement in the US economy (which is estimated to grow 3.6 percent in 2015) and therefore it is justified to state that the world economy is currently flying on one engine only. Read more

Pipeline Transportation For PHE ONWJ

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10″ Pipeline Transportation Technical Proposal:


Indonesia Project Logistics in Power Logistics Asia 2014

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PT. Indonesia Project Logistics was at Power Logistics Asia Exhibition & Conference in Singapore for a period of two days, from 18 – 19 November 2014. This is the first time for the company attending event for the cargo professionals related to different fields like energy, mining, heavy engineering, procurement and construction, oil and gas and petrochemical.

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We expect this exhibition will facilitate the industry professional and technical experts related to these sectors by giving them an opportunity to share their knowledge and experience with each other.

Power Logistics Asia Exhibition & Conference was attended by  various exhibitors like break bulk shipping companies, project charterers, forwarders, shipping lines, heavy lift and haulage equipment providers, and lifting equipment manufacturers and suppliers.

By attending this expo PT. Indonesia Project Logistics just would like to introduce and showcase our innovative solution in projects and services.

Indonesia to see 13 new oil & gas projects start up in 2014

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Jakarta (Platts), Indonesia’s 13 new oil and gas projects with a combined production capacity of 954,000 Mcf/d of gas and 194,121 b/d of oil and condensate are expected to start production in 2014, upstream regulator SKK Migas said Monday.

But despite the additional production, Indonesia is expected to miss its 2014 liquids production target of 870,000 b/d set in the annual budget, instead producing an average 803,800 b/d, Elan Biantoro, head of SKK Migas’ communication division, said.

“We have [taken into account the new production] in our projected production of 803,800 b/d [for 2014],” he said.

Most of the additional gas production will come from the Mahakam block offshore East Kalimantan which is held by France’s Total and Japan’s Inpex.

Total plans to bring onstream four new fields in the block that will produce a total 645,000 Mcf/d of gas and 6,500 b/d of liquids by the end of 2014, according to a statement released by SKK Migas on Sunday.

TOTAL EP INDONESIE site photo up date 2007

The four fields are: Sisi Nubi 2B, which is expected to produce 350,000 Mcf/d in Q1 2014; Peciko, which is expected to produce 170,000 Mcf/d and 4,000 b/d of liquids in Q1 2014; Peciko 7C, which is expected to produce 125,000 Mcf/d of gas and 1,500 b/d of liquids in Q2; and Bekapai 2A, which is expected to produce 1,021 b/d in Q1, SKK Migas said.

Local state-owned oil and gas company Pertamina and privately-held Medco plan to begin producing 8,000 Mcf/d and 250 b/d of liquids from the Senoro gas development project in Q3 this year, SKK Migas said.

There are three other projects that were originally to come onstream in 2013 but got delayed to 2014 — local company Odira Energy’s Karang Agung project in Sumatar, which is expected to produce 1,200 b/d of oil in Q2; Pertamina’s Gundih field in Java that is expected to produce 50,000 Mcf/d of gas and 600 b/d of liquids in Q1; and local company Manhattan Kalimantan’s Bayan A project in Kalimantan that is expected to produce 15,000 Mcf/d of gas and 250 b/d of oil in Q1, according to the statement. NO DELAYS

Meanwhile, Malaysia’s state-owned Petronas will bring onstream the Bukit Tua field in the Ketapang 2 block in East Java and the Muriah field in the Kepodang block in Central Java in the fourth quarter of the year.

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The Bukit Tua field is expected to produce 70,000 Mcf/d of gas and 20,000 b/d of liquids and the Muriah field 116,000 Mcf/d of gas.

Australia’s Santos will begin producing 25,000 Mcf/d of gas from the Peluang field offshore East Java in Q1 2014 and UK-based Salamander will bring onstream its Karendan field in Central Kalimantan with gas output at 25,000 Mcf/d and liquids output of 300 b/d in Q4 2014.

The last project is ExxonMobil aand Pertamina’s Banyu Urip field in the Cepu block, which is expected to reach a peak production of 165,000 b/d of oil in the fourth quarter, the statement said.

These projects must be closely monitored so that there are no delays, Biantoro said, adding that any delay would further cut 2014 production.

Indonesia for the fifth consecutive year missed its annual crude and condensate production target, pumping an average 826,000 b/d in 2013 compared to a revised government figure of 840,000 b/d, Platts reported earlier.

The lower than expected figure was attributed to natural output declines at the country’s aging fields and 1,600 unplanned shutdowns, Energy and Mines Minister Jero Wacik said.

Meanwhile, capital expenditure in the oil and gas sector is expected to rise 32.6% year-on-year to $25.64 billion in 2014, according to a document from SKK Migas.

About $14.9 billion, or 77.2% of the total expenditure, will be allocated for production activities. This is up 24.5% compared with 2013, the document obtained by Platts showed.

Oil and gas companies operating in the country will also set aside $5.3 billion to develop oil and gas fields, a 23.1% increase from last year, while exploration spending will increase by 104.6% to $3.84 billion.

Oil and gas companies will drill 250 exploration and 1,364 development wells, and 932 work over wells in 2014. They will also carry out 9,020 km of 2D seismic and 11,633 km of 3D seismic surveys, according to the document.

In 2013, oil companies had originally planned to drill 258 exploration wells but ended up drilling only 91 wells due lack of permits and rig availability. Of the 1,178 development wells planned, only 980 were drilled.

Indonesia’s Logistics Sectors

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Global Business Guide Indonesia, The Indonesia logistics sector is facing a period of rising demand in line with increased consumer and industry activity across the archipelago as a whole, as well as expanding external trade volumes. The logistics sector in Indonesia has shown resilience over the course of the global economic downturn which weakened exports, buoyed by domestic consumption and the expansion of the country’s SMEs. This is placing even greater focus on the country’s inherent weaknesses in its infrastructure which make Indonesia’s logistics costs the highest in South East Asia at 25% of total GDP (Indonesia Logistics Association) which in turn brings into question the country’s competitiveness, particularly as a manufacturing base. Other hurdles continue to plague the industry, namely a combination of unbalanced population density with disparately positioned industrial production centres outside the main island of Java. While these significant hurdles remain, there are signs of improvement; in 2010 Indonesia ranked 75th in the World Bank Logistics Performance Index, rising to 59th position in 2012. In addition, a number of large scale infrastructure projects which are currently underway in addition to the formulation of a cohesive strategy by the government and the private sector in the form of the National Logistics Blueprint are showing that steps are being taken in the right direction to make Indonesia’s logistics sector regionally and globally competitive.

Indonesia’s Logistics Sector

The upcoming ASEAN Connectivity Plan and ASEAN One Market in 2015 are creating a sense of urgency in the need to improve the logistics sector in Indonesia.
Indonesia’s logistics sector is made up of a combination of shipping and international freight forwarders with that of courier providers mainly engaged in land transportation and total logistics services providers that operate a multimodal transport model. There is now a marked trend by local businesses in moving towards outsourcing key aspects of their supply chain management and distribution to third party logistics providers opening up the need for specialized logistics services in the fields of FMCGs, electronics and petrochemicals. Key local players engaged in third party logistics include Samudera Shipping, Cardig Logistics which is part of Cardig International, Kamadjaja Logistics and Puninar Logistics. Multinational logistics players such as DHL and UPS have been operating in the market for several decades in collaboration with local partners particularly in the fields of express domestic and international document delivery as well as supply chain solutions. The market as a whole is highly fragmented among a handful of large companies and thousands of small and medium sized logistics players which is creating intense pricing competition in the market.

The logistics sector in Indonesia has been growing steadily since 2007 at 12.5% CAGR but is forecast to see acceleration in its growth to 14.5% y-o-y in 2013 bringing the industry’s total value to 1.634 trillion RP in value in response to improved infrastructure (Frost and Sullivan). Increased volumes of external trade are also expected over 2013 with 16.7% forecasted as a conservative estimate while further relocations of major manufacturers to the country such as Foxconn will also contribute to greater demand for logistics services in Indonesia. This is expected to attract further foreign direct investment into the transport and logistics sector from the $2.8 billion USD realized in 2012 which accounted for the second largest portion of FDI after mining. Over the medium term, this rate of expansion is expected to continue at 14.8% CAGR for 2013-2017 provided that the government and private sector infrastructure plans come into fruition (Frost and Sullivan).

The upcoming ASEAN Connectivity Plan and ASEAN One Market in 2015 are creating a sense of urgency in the need to improve the logistics sector in Indonesia. Both plans are intended to increase the connectivity between the ASEAN community as a way to keep the region competitive in the global market and promote further regional trade through the free flow of goods and people. As the largest economy in the ASEAN, Indonesia has a crucial role to play in the logistics sector and is central to the current developments underway as part of the project including sea transportation routes from Dumai to Malaka, Belawan to Phuket, and Bitung to Santos which are to be realized in 2015. A multimodal linkage system as per the National Logistics Blueprint which is a result of collaboration between the government and the private sector is being pursued to improve sea ports, airports, railway lines and roads in addition to IT infrastructure which will support more advanced track and tracing technology across regional borders. However it is estimated that Indonesia requires up to $2 billion USD in investment annually to realize the goals of the plan (Indonesian National Ship-owners Association).

A centerpiece of the new infrastructure developments is the New Priok Port which will be able to handle 11 million TEUs from the current figure of 6.8 million TEUs as well as 9 million cubic meters of oil and gas products. The first terminal of the $2.47 billion USD port is expected to be operational in 2014 with the second and third terminals due to be completed by 2023. The project has been opened up to foreign investors with Mistui & Co Ltd winning the tender for the first terminal. The development of the Sorong Port in Papua is a further example of Indonesia’s new logistical infrastructure development which is designed to cater to the East of Indonesia. These new ports will support the Nusantara Pendulum, a shipping route due to be introduced in 2014 that runs continuously from the East to the West of the country through six major ports and is then supported by localized shipping loops to reach the surrounding area. This plan is designed to lower logistical costs by using larger vessels for shipments, creating a balance between the East and the West of the country as well as preventing the return of empty vessels after a shipment.

Railways are a further element of Indonesia’s logistical infrastructure overhaul as they can serve to reduce congestion on the roads and at the ports. The construction of the double track Jakarta – Surabaya railway is being accelerated to accommodate rising rail cargo volumes which are expected to reach 25.5 million T in 2013 from 23.6 million T in 2011 (Frost & Sullivan). Further railways are under development in Central Kalimantan for coal transportation as well as in North Sumatra for transportation of commodities such as palm oil.

In addition to investments in infrastructure, technology also has a crucial role to play in improving the performance of Indonesia’s logistics sector. Technologies such as GPS tracking and RFID which are commonplace in Western and other Asian markets are as yet not widespread in Indonesia. This is due to their lack of suitability in many areas of the country such as Kalimantan which has limited electricity coverage and would therefore make such technologies and their related devices inaccessible. The market therefore offers significant opportunities for logistics technology providers who can provide solutions which are adaptable to the existing infrastructure available as well as being suitable for the level of education of Indonesia’s human resources. Simplified technologies that take advantage of the high penetration of mobile phones throughout Indonesia are already proving successful for example and present scope for further developments in this field. Online portals that facilitate freight swapping and shipment matchmaking, particularly for the still highly traditional and fragmented trucking industry also represent an as yet untapped element of the market.

Specialized logistics such as cold chain storage and transportation as well as project logistics also offer potential for partnerships and investment. The ban on imports of various horticultural products (See Overview of Indonesia’s Horticulture Sector) is encouraging local producers to expand their production to meet market demand yet most small scale producers lack the facilities and know-how for the correct storage and distribution of their fresh produce. The dairy industry (See Overview of Indonesia’s Dairy Sector) is a further example of a sector with increased domestic demand yet lacking suitable cold storage facilities and specialized vehicles. Technology that can provide cold storage in rural areas where a reliable electricity supply is absent holds significant potential in Indonesia. Further changes in the regulatory environment such as the ban on exports of unprocessed minerals (See The Increase in Added Value of Minerals on the Issuance of MEMR Regulation No. 07 of 2012) will boost demand for project logistics providers that can cater to this highly niche sector.

Both local and international logistics firms are positioning themselves to take full advantage of the bright prospects in Indonesia’s logistics sector. Global logistics leader DHL has carved out a dominant position in the Indonesian logistics market by initially focusing on local and international document delivery but has since expanded into supply chain logistics, freight forwarding and other aspects of third party logistics. At the beginning of 2013, the company announced its plans to invest up to $52.3 million USD over the coming years in Indonesia in order to increase its fleet of vehicles, to expand its warehouse capacity by 60% and its number of employees by 70% for 2015. Further examples of international interest in the sector’s growing potential include a joint venture announced between the logistics arm of Singaporean Keppel Telecommunications and Puninar Logistics which will see the former sharing technology and IT management expertise to move up the value chain in logistical operations. As a further signal of confidence in the sector at this key time, state postal service operator PT Pos Indonesia has announced its intention to launch an IPO shortly following its record performance of $23 million USD in net income in 2012, an over 50% increase from the year prior.

Indonesia’s logistics sector is vital to the country’s future by ensuring more balanced economic development across the archipelago. The country’s booming domestic demand for FMCGs, electronics, telecommunication equipment as well as industrial goods such as cement are creating a buoyant logistics market. However, infrastructure challenges continue to stifle the industry’s potential in addition the country’s lack of qualified logistics professionals which must be overcome to ensure that Indonesia is able to compete effectively in the ASEAN One Market. In spite of these challenges, the logistics sector has shown resilience and adaptability; yet, as the local companies strive to move up the product value chain they will require more sophisticated logistics services and technology to serve the local as well as international market.

SKKMigas approves expansion plan for 6 offshore drilling platforms

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Jakarta Post, The upstream oil and gas regulatory special task force SKKMigas approved the development plan for six new integrated offshore oil drilling platforms managed by the Pertamina Hulu Energi West Madura Offshore (PHE WMO) to boost its oil production capacity.

PHE production and operation director Kunto Wibisono said on Thursday that the development plan would be conducted on PHE-6/12, 7, 24, 29, 44, and 48 oil and gas drilling fields in the West Madura Offshore block.

Kunto said the six platforms would be developed using a minimalist model and integrated to ‘processing platform’ facilities.

“With a minimalist platform concept, the development of the six platforms will be more cost-efficient. SKKMigas considered the integrated development to have economic value so it was approved,” said Kunto as quoted by Antara news agency.

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Following the approval, he said, PHE would hold a tender process for the development of the project.

“The development will take around nine months so that the project can hopefully increase the PHE WMO oil and gas production capacity at the beginning of 2015,” he added.

Currently, PHE WMO oil production capacity stands around 24,000 barrel per day (bpd) and its highest production reached 26,600 bpd in the beginning of August.

“Oil production at the WMO block natural decreases by as much as 50 percent per year, so drilling activities to find new oil reserves and increase the production are imperative,” said Kunto.

The current production capacity of the block was far higher than at the beginning of May 2011, which was only 11,550 bpd, he said. (ebf)

Pertamina starts development of $152 million gas project

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Jakarta (ANTARA News) – PT Pertamina Hulu Energi Offshore North West Java (PHE ONWJ) will start work to develop the GG gas field in the Java Sea with an investment of US$152 million (Rp1.67 trillion).

General Manager of the subsidiary of state oil and gas company PT Pertamina, Jonly Sinulingga said he had signed an engineering, procurement, construction and installation (EPCI) contract to mark the start of work.

“The signing took place this monring,” Jonly said here on Thursday.

Jonly said the offshore GG gas project, located 30 kilometers north Cirebon , West Java, includes construction of an offshore rig and an onshore processing facility (OPF) in Balongan, to be linked with a 35 kilometer undersea pipe.

“The GG field with three wells are expected to produce around 30 MMSCFD of gas,” he said.

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PHE ONWJ Platform Uniform

After being processed at the OPF, the gas would be processed further by Pertamina to turn out liquefied petroleum gas (LPG).

The Balongan OPF will add to three onshore gas receiving facilities of PHE ONWJ – one each in Muara Karang, Tanjung Priok, and Cilamaya.

PHE ONWJ is the operator of ONWJ block over a concession of 8,300 sq. kilometers in the Java Sea extending between the sea off Cirebon and the Thousand Island off Jakarta.

Its production facilities include 670 wells, 170 offshore oil/gas rigs, 40 units of processing facility and around 1,600 kilometers of undersea pipelines.