JAKARTA. Sluggish oil markets will continue to cloud the upstream industry this year and prompt a majority of oil companies in Indonesia to implement decreases in their workforce, a survey by PricewaterhouseCoopers ( PwC ) Indonesia has indicated.

In an overwhelming majority, 91 percent of respondents believed that employment in the oil and gas industry would decrease this year, highlighting the continuing effect of the slide in the oil price.

“Almost 75 percent of the respondents expect their company to reduce their expatriate workforce, with 53 percent expecting a decline in the number of local hires,” said Sacha Winzenried, PwC Indonesia’s lead advisor for energy, utilities and mining, said in Jakarta on Thursday.

Likewise, future spending is expected to slow, particularly for exploration, compared to previous years. Only half of those surveyed expected that their company would increase exploration activities globally and in Indonesia in the next three years.

As for general capital expenditure, respondents were broadly divided into three similarly sized groups: one-third would decrease capital expenditure, one-third would increase it and one-third would maintain it as is.

The PwC survey showed that most oil and gas companies operating in Indonesia cited several key challenges facing the oil and gas industry, especially contract sanctity and certainty around production sharing contract ( PSC ) extensions.

Other challenges were the lack of consistent policies among the government’s units, new tax or cost recovery regulations affecting PSC terms, uncertainty over cost recovery and audits, as well as the absence of a single authority to objectively resolve disputes.

"Providing a positive investment regime with certainty around rules, regulations and return on investment is even more important in the current low oil price environment," Winzenried said.

He also noted that funds for investment in oil and gas were scarce and Indonesia must compete to increase investment. This provides an opportunity to improve the regulatory environment for oil and gas investment to attract the scarce available funds.

On the bright side, the survey showed five competitive features of the Indonesian oil and gas industry, such as geological opportunities, trained workforce, ease of foreign ownership, fast project approval and the existing fiscal framework and contracts. (Ayomi Amindoni)

Editor: Yudho Winarto