By Raymond Hendriawan
Malaysian state-owned energy company Petronas is intensifying its expansion into Indonesia, aiming to solidify its position as a major player in the country’s oil and gas sector. This accelerated expansion is unlikely to be a coincidence but rather the result of converging regulatory reforms, strategic realignments, and regional energy dynamics that have made Southeast Asia’s largest economy increasingly attractive to international energy investors.
Petronas’s initiatives now span 13 Production Sharing Contracts (PSCs) from Java to the eastern frontiers of Indonesia, encompassing significant investments in upstream assets, LNG projects, and deepwater exploration.
Operational presence
As operator:
- Blok Ketapang – Petronas Ketapang II Ltd. (Operator, 77,6%)
- Blok North Madura II – PC North Madura II Ltd. (Operator, 100%)
- Blok North Ketapang – Petronas North Ketapang Sdn. Bhd. (Operator, 100%)
- Blok Bobara – Petronas E&P Bobara Sdn. Bhd. (Operator, 100%)
- Blok Hidayah (North Madura II) – PC North Madura II Ltd. (Operator, 100%)
- Blok Serpang – Petronas Energy Serpang Sdn. Bhd. (Operator, 51%), INPEX (35%), SK earthon (14%)
As Joint Venture partner:
- Blok Binaiya – Petronas Energy Binaiya Sdn. Bhd. (22%), Pertamina Hulu Energi (56%), SK Earthon (22%)
- Blok Masela – Petronas Masela Sdn. Bhd. (15%), Pertamina Hulu Energi (20%)
- Blok Sakakemang – Petronas (45%), Repsol (45%), Mitsui Oil Exploration Co. Ltd (10%)
- Blok Natuna Sea A – Premier Oil (28.67%), Kufpec (33.33%), Natuna 1 B.V. (Petronas) (15%), Natuna 2 B.V. (PTTEP and Pertamina PHE) (23%)
- Blok Madura Offshore – Santos Pty Ltd (67.5%), Petronas Carigali (PC) Madura Ltd (22.5%), PT Petrogas Pantai Madura (PPM) (10%)
- Blok Jabung – Petrochina International Jabung Ltd (Operator at 30%), PT Pertamina Hulu Energi Jabung (28%), Petronas Carigali Jabung Ltd (20%), PT GPI Jabung Indonesia (14%), PT Raharja Energi Tanjung Jabung (8%)
Why now?
Indonesia’s government has taken several key steps in recent years to make its upstream oil and gas sector more appealing to foreign investors. These include:
- Offering the gross split scheme as an option
- Revising Ministerial Regulation No. 12/2020 to provide better profit split percentages
- Implementing one-door licensing reform through the Online Single Submission (OSS) system
- Accelerating SKK Migas approvals through fast-track mechanisms
- Promoting CCS/CCUS commercialization, highlighted by the recent MRA signing with Gold Standard.
Petronas’s push into Indonesia aligns with its strategy to diversify beyond Malaysia, where domestic reserves are maturing. Indonesia’s untapped deepwater potential, particularly in the eastern regions, fits Petronas’s capabilities and its appetite for high-risk, high-reward investments.
The Bobara Block in West Papua, estimated at 6.8 billion boe, fits this frontier profile and marks Petronas’s first operated deepwater asset in Indonesia.
Figure 1 Jabung Block concession map (Source: Bisnis Indonesia)
Moreover, the exit of major players like Shell from Masela has created rare entry points into high-profile assets, allowing Petronas to move decisively in forming strategic joint ventures with Pertamina and others.
Petronas is also doubling down on its LNG value chain. As global demand for LNG rises particularly in Asia, the company sees Indonesia as a natural extension of its regional gas and LNG portfolio. Collaborations like the Petronas-Eni upstream joint venture, potentially linked to Eni’s Geng North gas project in the North Ganal PSC, underscore this push.
Strengthening presence in East Java
Petronas currently manages four oil and gas blocks in Indonesia, three of which are in East Java. The company reported 25,000 barrels oil equivalent per day (boepd) in Indonesia by mid-year 2024. A key upcoming milestone is the Hidayah Field in the North Madura II Block, expected to start production by the end of 2027. Petronas projects this field will add approximately 30,000 bpd of oil output, more than doubling its current production levels in Indonesia.
However, Petronas Indonesia’s President Director, Yuzaini Md Yusof, recently revealed that the company’s 2025 production target has been adjusted downward due to natural declines in reservoir pressure and increasing water cut in existing wells. Production from some mature fields, such as those in the Ketapang Block, has declined following expected decline rates of 10 to 13 percent annually. As a result, the production target for 2025 has been revised from an earlier estimate of 8,000 barrels per day to approximately 5,700 bpd, with gas production maintained at around 40 million standard cubic feet per day (MMSCFD).
Figure 2 North Madura II and Ketapang Block
To counter these declines, Petronas plans to drill two infill wells in 2025, with support from SKK Migas, aiming to stabilize and potentially increase production by the end of the year. In parallel, development projects such as Bukit Panjang in the Ketapang Block are slated for the future, targeting production growth by 2027.
Despite the natural decline challenges, Petronas maintains operational profitability, with production costs estimated between US$15 and US$17 per barrel. The company continues to invest in well intervention and enhanced recovery techniques to sustain production in mature fields while pursuing new exploration and development opportunities.
Strategic moves in Eastern Indonesia: Masela and Bobara
In a strategic move, Petronas, through its subsidiary Petronas Masela Sdn. Bhd., acquired a 15% participating interest in the Masela Block's Production Sharing Contract (PSC) in July 2023. This acquisition was part of a joint effort with PT Pertamina Hulu Energi, which took a 20% stake, following Shell's exit from the project. The Masela Block, located in the deep waters of the Arafura Sea, is set to be Indonesia's first LNG project to integrate Carbon Capture and Storage (CCS) technology from the outset.
Figure 3 Masela PSC
Expanding its footprint, Petronas signed a production-sharing contract for the Bobara block offshore West Papua in 2024. The Bobara block, estimated to hold 6.8 billion barrels of oil equivalent, represents Petronas's first deepwater project in Indonesia as an operator. The company is currently in discussions with Pertamina and TotalEnergies to form a partnership for the development of this significant asset. Petronas’ Vice President of International Assets Upstream, Mohd Redhani Abdul Rahman, expressed optimism about these projects, "So, Bobara, which we signed last year, will become one of the first deepwater PSCs to operate in Indonesia. We hope this PSC will open up further opportunities in eastern Indonesia. We are very excited and hopeful that it will bring good results next year.”
Figure 4 Bobara concession block
Advancing LNG capabilities through joint ventures
Petronas is strategically aligning with Italy’s Eni to establish a joint venture (JV) that consolidates their upstream assets across Indonesia and Malaysia. This collaboration aims to combine approximately 3 billion barrels of oil equivalent (boe) in proven reserves, with an additional 10 billion boe of exploration potential, positioning the JV as a formidable player in Southeast Asia's LNG sector.
Eni's strategic assets in Indonesia
Eni has significantly expanded its footprint in Indonesia, particularly in the Kutei Basin, through the development of key gas fields:
- Merakes East Field commenced production in May 2025, delivering up to 100 million standard cubic feet per day (MMSCFD) of gas (approximately 18,000 boepd). The field is integrated via subsea tie-back to the Jangkrik Floating Production Unit (FPU).
- Geng North and Gehem Fields are central to the planned Northern Hub, with the Geng North discovery alone holding an estimated 5 trillion cubic feet (Tcf) of gas and 400 million barrels of condensates. Development plans include a new Floating Production Storage and Offloading (FPSO) unit with a capacity of 1 billion cubic feet per day (BCFD) of gas and 80,000 barrels per day of condensates.
- Gendalo & Gandang Fields are part of the broader Indonesia Deepwater Development (IDD) project, these fields further enhance Eni's gas portfolio in the region.
These assets are strategically positioned to supply gas to existing LNG infrastructure, such as the Bontang LNG plant, facilitating efficient monetization of resources.
Eni's global partnerships and Enilive initiative
Beyond upstream operations, Eni is advancing its energy transition strategy through Enilive, its mobility and biofuels subsidiary. In a notable development, Eni sold a 30% stake in Enilive to KKR with post-money valuation the unit at €11.75 billion. Enilive focuses on sustainable energy solutions, including biofuels and electric vehicle infrastructure, aligning with Eni's decarbonization goals.
Figure 5 Enilive fuel’s retail station
This move underscores Eni's commitment to diversifying its energy portfolio and investing in low-carbon technologies, which could complement the JV's objectives in Southeast Asia.
Forecasting the Eni-Petronas joint venture
The proposed JV between Petronas and Eni is poised to become a significant LNG entity in Southeast Asia, leveraging combined expertise and assets to meet rising energy demands. Key forecasts include:
- Production targets may reach a sustainable output of 500,000 boepd (Indonesia and Malaysia) in the medium term, capitalizing on both companies’ upstream portfolios.
- Petronas may include its assets in the Kutai Basin as part of the JV, seeking a balanced and complementary asset mix.
- The JV is expected to enhance LNG supply capabilities, tapping into existing infrastructure and exploring new development opportunities to solidify its market presence in SEA.
Petronas outlook: Consolidating a major role in Indonesia’s O&G future
Petronas’s strategic expansion in Indonesia reflects a carefully balanced approach that combines immediate production growth with long-term exploration and innovation. The company is strengthening its foothold in East Java by enhancing production capacity and pursuing new development projects such as the Hidayah Field, which is expected to contribute an additional 30,000 barrels per day by 2027. This builds on its existing operations that currently produce around 15,000 barrels per day, demonstrating Petronas’s commitment to sustaining and growing output even in mature fields.
At the same time, Petronas is making decisive moves in eastern Indonesia, widely regarded as the country’s oil and gas frontier or “backyard.” By managing 13 PSCs across the archipelago, including the recent strategic blocks like Bobara in West Papua, Serpang in East Java offshore, and Binaiya in Maluku offshore, Petronas is positioning itself as a leading player in these less-developed but resource-rich areas. In particular the Bobara Block, with its estimated 6.8 billion barrels of oil equivalent, exemplifies Petronas’s deepwater ambitions and its intent to unlock new hydrocarbon resources in challenging environments.
Petronas’s involvement in the Masela Block marks another strategic milestone. Holding a 15% stake, the company is part of Indonesia’s pioneering LNG project that will integrate Carbon Capture and Storage (CCS) technology from the start, signaling its dual commitment to expanding Indonesia’s energy supply while supporting decarbonization efforts. This aligns with its broader partnership with global energy giant Eni, where the two firms are combining upstream assets with significant reserves to create a major LNG player in Southeast Asia.
While Petronas has not formally confirmed participation in Eni’s Geng North gas project, ongoing collaboration hints at potential future involvement in this important development, which will further cement its role in Indonesia’s offshore gas sector.
In summary, Petronas’s multi-pronged strategy demonstrates its clear ambition to emerge as a major oil and gas player in Indonesia. By combining production growth, deepwater exploration, strategic partnerships, and technological innovation, Petronas is not only securing its position in Indonesia’s energy market but also supporting the country’s broader goals of energy security and a cleaner energy transition. As these projects advance, Petronas is set to play a transformative role in reshaping Indonesia’s energy landscape well into the future.
