This report profiles Indonesia’s oil and gas industry, discussing market trends and outlook through 2013 and 2014. The report also highlights leading players in the sector including PT Medco Energi Internasional Tbk, PT Perusahaan Gas Negara Tbk, and PT Energi Mega Persada Tbk. The Indonesian oil and gas sector witnessed a tough period in FY13. The upstream segment saw a decline in the production of crude oil as well as natural gas. Furthermore, domestic crude production was not sufficient to meet the demand. As a result, a large proportion of the requirement was met through imports, thus disturbing the trade balance in the sector as well as the economy. There has been a rapid increase in trade deficit recorded in the sector during the last five years despite having a substantial export share. Government subsidies are another concern in the sector. Though the government has tried to reduce it by gradually implementing some cuts, yet it still poses a big drain on the country’s fiscal balance. The subsidies also make private sector participation in the downstream market unviable. In FY14, decline in crude oil prices post second quarter brought some relief to the trade balance as the value of imports declined. Natural gas exports also revived, reversing the trend of the last two years. However, oil production continued to decline causing a strain in finances of upstream players. The oil and gas players will have to brace up and look at ways to pump up their production in order to stay competitive and profitable in the coming years. Key Points: • Indonesia was ranked 24th in terms of crude production and accounted for about 1% of the global production as of 2013. • The country is highly dependent on the oil and gas sector for its primary energy consumption. Petroleum and natural gas together accounted for 53% of the country’s primary energy consumption requirement. • Total oil production declined at a CAGR of 3% during 2009-13. Meanwhile, domestic consumption of petroleum grew at a CAGR of 4% during the same period. • FY14 proved to be a tough year for the economy with GDP slowing to a five-year low. Oil and gas mining and production emerged as one of the worst performing sectors, showing a successive decline in all the three quarters.