Speculation is rife that former Indonesian Energy Minister, Arcandra Tahar, will soon be reappointed after handing back his U.S. passport and regaining Indonesian citizenship.

But Arcandra’s ties to the U.S. could hamstring the likes of Chevron, Indonesia’s biggest oil producer, as well as ExxonMobil, ConocoPhillips and other U.S. based companies operating in Indonesia’s notoriously nationalistic oil patch.

Arcandra was appointed Energy and Mineral Resources Minister as part of a cabinet reshuffle on 28 July, only to be dismissed 20 days later after he was found to hold dual citizenship – which is not allowed in Indonesia.

Arcandra was in the process of renouncing his U.S. citizenship, which he acquired after spending 20 years working in the US oil and gas sector.

But public and political uproar in advance of Indonesia’s independence day on 17 August forced President Joko Widodo, known locally as Jokowi, to dismiss him.

If Arcandra is reappointed, as expected following the scandal, some industry executives fear the energy ministry could treat U.S. oil companies poorly going forward, just to avoid potential accusations of any hint of bias.

Foreign investors are already feeling the wrath of rising resource nationalism in South East Asia’s biggest hydrocarbons producer, particularly as the national oil company Pertamina is given more power.

Nevertheless, despite a number of politicians expressing their reservations about Jokowi’s plan to reappoint the minister, it’s purportedly a done deal, sources at the energy ministry said.

I was told by Dr Kurtubi, an oil and gas lawmaker in Indonesia’s parliament that he expected Jokowi would most likely reinstate Arcandra by mid-September once the fiasco surrounding his citizenship was resolved.

Although a controversial move it would be a show of Jokowi’s authority that petty legalities will not get in the way of putting his chosen man in office.

Interestingly, should Arcandra fail to return as Energy Minister, Darmawan Prasodjo, the Deputy Chief of Staff at the executive office of the president, who attended Texas A&M University in the U.S. at the same time as Arcandra, has been mooted as a potential successor.

Still, it would take a contrarian to bet against Arcandra, who the president has placed a great deal of faith in. Not too mention immense political capital by accelerating the return of his citizenship.

Behind the scenes Arcandra was instrumental in advising the president on the high profile political tussle that surrounded Shell and Inpex’s proposed Masela liquefied natural gas (LNG) project earlier this year.

The pair proposed to develop the big gas field using novel floating LNG technology offshore, rather than pursuing a traditional land-based liquefaction export plant.

But in an unprecedented move the president, over the objections of then Energy Minister Sudirman Said and upstream regulator SKKMigas, vetoed the floating LNG scheme and instructed the oil companies to pursue the onshore approach for the Masela field.

Despite an independent study from international consultants Poten & Partners, that was commissioned by the government, concluding the floating LNG scheme would be the most profitable way to develop the gas for both state and investors, Jokowi instead chose the onshore route, which he said would help boost the regional economies in eastern Indonesia.

Arcandra, who has a strong background in offshore deep-water engineering, is widely believed to have influenced Jokowi’s tilt towards the traditional development approach, which has set the planned gas development back a number of years.

While it remains to be seen when and in what guise Arcandra will return, he will almost certainly have the president’s ear. His technical acumen would be a welcome boost for Indonesia’s struggling industry, which urgently needs to tap more deep-water fields.

But more heavy-handed governmental interventionism would spook the international oil companies (IOCs), whose deep pockets and technical know-how are desperately needed to revive upstream production growth and avert a looming energy crunch. Analysts estimate the country will have a supply shortfall of 2.5 million barrels of oil equivalent per day in 2025.

Indonesia is ripe for deep-water exploration and development. But Arcandra, should he return as Energy Minister, will need to drastically improve the fiscal and policy regime to unleash the deep-water technology – available globally through the IOCs – at home in Indonesia.

However, given the increasing rhetoric in favour of economic nationalism, foreign investors – which include Chevron CVX -2.74%, ConocoPhillips COP -2.38%, ExxonMobil XOM -2.48%, BP, Total, Shell and Inpex – will need plenty of incentives, not too mention a stable and predictable business environment, to boost their investments in Indonesia.

By : Damon Evans*


Damon Evans ,

*I am a Southeast Asia-based independent consultant, editor and journalist from the UK. Covering the Asia Pacific energy beat for 10 years. Alum of Reuters, Petroleum Economist and Upstream. I focus on the politics and economics of the energy business, as well as upstream, oil, gas, and liquefied natural gas (LNG) market trends. More recently covering energy systems transition and technologies, as well as renewable energy and climate change. Aside from writing for various energy publications, I provide bespoke intelligence and analysis to investors, governments and corporations with significant stakes in energy projects in the Asia Pacific region. Before writing about energy, I worked on oil and gas projects in Far East Russia, Indonesia and Australia.

Source : Forbes.com and eksplorasi.co.id

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