Open AccessThe Investors’ Perspective on Investment Attractiveness of Oil and Gas Exploration Industry in Indonesia
Author(s) -
Khaidir Riswan,
Martha Fani Cahyandito,
Aldrin Herwany,
Mokhamad Anwar
Publication year - 2018
Publication title -
international journal of engineering and technology
Language(s) - English
Resource type - Journals
ISSN - 2227-524X
DOI - 10.14419/ijet.v7i4.15.23592
Subject(s) - government (linguistics) , attractiveness , investment (military) , business , petroleum industry , production (economics) , shareholder , variable (mathematics) , finance , monetary economics , economics , industrial organization , corporate governance , microeconomics , engineering , psychology , mathematical analysis , philosophy , linguistics , mathematics , environmental engineering , politics , political science , psychoanalysis , law
As from the year 2011 to date, the oil and gas exploration (O&G) industry in Indonesia is not attractive anymore to the investors. It is clearly shown by all indicators of the O&G exploration performance in Indonesia which decline sharply causing the RRR (Reserves Replacement Ratio) is currently about 0.5. As the result the national O&G reserves and production decline as well. Starting the year 2004 Indonesia has become an oil nett impoter; the consumption is much bigger than the national production. This is threatening the availability of O&G energy source so that it can cause state instability. This study aims to conduct the assessment of the investors’ perspective on the investment attractivenesss of O&G exploration industry in Indonesia, taking into account two main variables, i.e: the Government Regulation and Global Environment Variables using Analytical Hierarchy Process (AHP) method. The units of analysis are the O&G investors which means the shareholders. Meanwhile, observation units are the top management and the managers of O&G companies in Indonesia. Result of the study shows that Government Regulation Variable is the worse variable to accommodate the investors’ expectation causing the low attractiveness of the O&G exploration industry in Indonesia. Surprisingly the influence of Global Environment variables, such as world crude oil price, is not significant compared to the Government Regulation. To increase the attractiveness of O&G exploration industry, Government of Indonesia should reform the existing regulation and increase government support for this industry to match the global environment which keeps changing.