The U.S. Energy Information Administration (EIA) projects the price of Brent crude oil in 2024 and 2025 to be floating at $82/barrel. However, the geopolitical situation that is heating up due to conflicts in the Middle East may increase crude oil production and consumption, hence the world crude oil price has the potential to exceed projections. The projection of world crude oil prices in the upcoming years has become more uncertain, due to the geopolitical shocks, added with heated tensions could disrupt distribution channels and crude oil production activities. This situation could trigger a spike in crude oil prices. In addition, the death of the President of Iran, Ebrahim Raisi, in a helicopter crash on Sunday (20/5) also has the potential to destabilize world oil prices. As a country with the third largest conventional oil reserves in the world with 209 billion barrels of conventional oil reserves, Iran has a great influence on the movement of world oil prices.

Iran contributes about 3.3% of global supply and produces 2.4 million barrels of oil per day. By 2023, Iran will be the second largest source of supply growth in the world after the United States. If the war escalates, the world's oil distribution channels will be hampered as the Strait of Hormuz, which separates Iran from the United Arab Emirates, will also be affected. The flow through the Strait of Hormuz contributes about 17 million barrels per day. This figure is equivalent to 12% of the global oil flow. This could trigger a spike in global oil prices. This rising geopolitical tension is contributing to rising inflation and concerns about economy recovery. Hence, this leads to the uncertainty of the price while the needs of crude oil always increasing YoY due to the industry and vehicle fuels. As we directed to the chart, the forecasting of crude oil needs in 2024 and 2025 will highly around 103-105 millions barrels per day. OPEC are the largest contributor of oil in distribution to various countries in the world. One of them is Iran, which is the main actor in the heated geopolitics, contributing millions of oil per day consistently in the range of 0.7 to 2.5 million barrels per day (Jan 22-Jan 24).

In 2021, Indonesia’s government Non-Tax State Revenue (PNBP - Penerimaan Negara Bukan Pajak) from the oil and gas sector rebounded to IDR95 trillion, surpassing the target by 26.67%, largely due to high oil prices driven by global geopolitical factors. Entering 2022, following more stability in oil and gas prices, the oil and gas revenue reached a level of IDR148.7 trillion from a target of IDR139 trillion75. In 2023, the realization of Non-Tax State Revenue in the oil and gas sub-sector reached IDR117 trillion, indicating a decrease from 2022, but still 113% of the target set of IDR103.6 trillion76. The export revenue from oil and gas grew to 4.35% of total exports in 2021 but experienced a decline to 3.75% in 2022 and 2023, marking the lowest level in the past decade (refer to figure Oil and Gas exports as a % of total Indonesian exports). Concurrently, the contribution of the oil and gas industry to Gross Domestic Product (GDP) saw a decline from 3.46% in 2021 to 3% in 2022 and 2.49% in 2023 (refer to Oil and Gas products as a % of total Indonesian GDP).To maintain its oil price, Indonesia is adding 15 upstream oil and gas projects by 2024 and will add production capacity of 41,922 barrels of oil per day (BOPD) and 207 million standard cubic feet per day (MMSCFD). Through these onstream projects, Indonesia is expected to be self-sufficient in meeting its oil needs. The government also took the initiative to create a policy that was discussed at the Commission VII DPR RI working meeting to procure the latest technology that can increase production by more than three times compared to primary recovery only.

The energy sector, especially the oil and gas industry, is one of the sectors affected by this sentiment. This situation creates an unavoidable domino effect for companies operating in the oil and gas industry, including PT Petrosea. Petrosea is a company engaged in EPC (Engineering, Procurement, and Construction) contracts, mining contracts, and oil & gas services. The current situation presents a positive sentiment for Petrosea. Tensions in the Middle East forcing Indonesia to expand its oil and gas production capacity to 41,922 barrels of oil per day (BOPD) and 207 million standard cubic feet per day (MMSCFD) is a breath of fresh air for Petrosea as an oil and gas service company.