Indonesia's oil production has fallen off in recent years, as production slows in older fields and new developments fail to replace them. As demand grows globally and domestically, Indonesia is making an effort to lure Big Oil back to town to kick-start oil and gas exploration again.
Statoil ASA (NYSE: STO) obtained an exploration license for more than 8,000 square kilometers in Indonesia. No wells have been drilled near this particular play yet, but it is representative of Statoil's quest to make Indonesia an important part of its foreign gas development initiatives. It is the sixth Indonesian operating license acquired by Statoil this year, bringing its overall total to eight.
Statoil isn't the only company ramping up interest in Indonesia this year. BP (NYSE: BP) was recently awarded two production sharing contracts by the Indonesian government for offshore oil and gas production.
Italian player Eni (NYSE: E) was also awarded two contracts, one onshore, one off, and hopes to see its projects come onstream as early as 2015.
The significance of Indonesia
Indonesia left OPEC in 2008 when it became a net importer of oil. When it comes to natural gas, however, the country ranks 11th in the world for production. In fact, natural gas production has increased by more than a quarter since 2005.
Indonesia is the seventh largest exporter of natural gas globally, exporting half of its natural gas as late as 2009, but domestic demand is expected to continue to climb and the future of exports will rely heavily on the successful exploration initiatives of the major oil and gas companies mentioned earlier. The country was the 22nd largest consumer of natural gas last year.
LNG in Southeast Asia
The trend of increasing energy consumption concerns another regional natural gas player: Malaysia, one of the world's leading liquefied natural gas exporters, recently announced it will have to begin importing LNG next year to meet domestic demand.
As these traditional LNG exporting powers weaken, opportunity abounds for other countries to pick up the slack. Australia and Qatar are top exporters in the region right now, and in fact have both secured export contracts with Malaysia. Led by Cheniere Energy (AMEX: LNG) and Apache (NYSE: APA) , the U.S. and Canada have several projects in development, expected to come online by 2015.
Foolish bottom line
China, Japan, and South Korea all import significant amounts of LNG. When exporters require more gas themselves, the market becomes an interesting place. Demand in Southeast Asia is only going to increase in coming years, providing consumers for LNG producers across the globe.
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