Indonesia: Can Prabowo Deliver on His Upstream Oil & Gas Ambition?

What happened: The Prabowo administration recently granted nine oil and gas exploration blocks to several IECs.

Why it matters: The outcome of the bidding round signals a new era for Indonesia's underexplored upstream sector, particularly in eastern regions and deepwater areas.

What happens next: To translate its ambitious upstream plans into more output, the government must narrow the persistent gap between licensing and execution.

In mid-March, the government awarded exploration rights across several oil and gas blocks to some global firms, including BP, Mubadala, and Inpex. The announcement was framed as a turning point: After years of declining oil and gas production and limited exploration success, Indonesia is once again trying to revive its underexplored upstream sector by inviting foreign investment.

For much of the past decade, Indonesia’s energy policy has leaned heavily toward downstream development, particularly in minerals such as nickel. Despite its continued importance to the domestic economy, the oil and gas sector has received less attention.

A lack of investment and exploration has resulted in a steady decline in production, forcing the country to rely increasingly on imported crude and refined fuels. Now, with the Middle East crisis pushing prices to unaffordable levels for almost any country, Indonesia faces an oil crisis at home.

Against that backdrop, the decision to award new oil and gas blocks is aligned with President Prabowo Subianto’s energy security and self-sufficiency goals.

Upstream Ignored

For oil and gas investors, the outcome of the bidding round matters because it confirms the government's renewed willingness to engage with foreign players. Due to a lack of political commitment and poor planning, Indonesia’s upstream oil and gas sector has long been underexplored, particularly in eastern regions and deepwater areas where geological potential remains significant. The entry of established international operators signals that these prospects are still commercially attractive.

However, the optimism should be tempered. Indonesia has a history of announcing ambitious upstream plans that fail to materialize. The gap between licensing and execution remains one of the most persistent challenges in the sector. Investors are not just evaluating resource potential, but also the government’s ability to follow through.

There is a high expectation that Laode Sulaeman, Director General of Oil and Gas at the Ministry of Energy and Mineral Resources (ESDM), will be able to resolve the red tape and long bureaucratic processes in the sector. His boss, Energy Minister Bahlil Lahadalia, has said that Laode needs to cooperate with SKK Migas, oil and gas contractors and other relevant agencies and stakeholders to resolve regulatory bottlenecks. Laode is also responsible for expediting the auction process and ensuring a sufficient gas supply for domestic consumers.

This is where the real uncertainty lies. Securing a block is only the first step in a long process that includes exploration, appraisal, development planning and eventual production. Each stage requires approvals from multiple layers of government, often involving overlapping authorities and shifting regulatory requirements. Delays are common, and timelines often stretch far beyond initial expectations.

Moving the Goalposts

There is also the question of contract stability. While Indonesia has introduced more flexible production sharing terms in recent years, concerns remain about fiscal certainty and policy inconsistency. Investors have seen rules change midstream before — particularly when political priorities shift.

As a result, it is plausible that not all of the newly awarded blocks will progress as planned. Some may stall at the exploration stage. Others may be delayed by permitting issues or disagreements over development terms.

In a worst-case scenario, a portion of these projects could be quietly shelved, repeating a pattern that has played out before.

The next steps will depend largely on how the government, particularly Laode and SKK Migas, manages the post-award phase. If the Prabowo administration can streamline approvals and maintain contract clarity, the current momentum could translate into real investment flows. If not, the latest licensing round may become another missed opportunity.

Energy Security

The broader geopolitical context adds another layer of urgency. Higher global oil prices due to the Gulf crisis translate directly into fiscal pressure through fuel subsidies and increased import bills.

This concern explains why the government is pushing upstream development more aggressively. Prabowo favors expanding domestic oil and gas production to reduce dependence on volatile international markets and strengthen economic resilience.

Nonetheless, upstream projects take years to deliver results. Even under the most optimistic scenario, the blocks awarded in 2026 will not contribute meaningfully to production for the rest of this decade. In the meantime, Indonesia will remain exposed to global price swings.

The impact on investor confidence will hinge on credibility. If the government can show that this round is different, that projects are moving forward without excessive delay and that agreements are being honored, Indonesia could regain its standing as a serious upstream destination.

If, however, the government fails to address structural bottlenecks, confidence could erode quickly. Indeed, Indonesia’s challenge is less about attracting than about sustaining investor interest.