SKK Migas Says Upstream Oil and Gas Insurance Business Still Profitable

Jakarta, Kompas.com – Special Work Unit for Upstream Oil and Gas Activities (SKK Migas) says the insurance industry in the upstream oil and gas sector remains profitable. This is reflected by premiums being higher than claims paid. Achmad Rezki Isfadjar, Head of the Tax, Insurance and Treasury Division at SKK Migas, said this condition keeps the global risk underwriters market rating upstream oil and gas as a promising sector. Rezki stressed that the use of foreign insurance does not mean harm to the insured. He recalled the experience of 2012-2013, when total claims rose to as much as three times the average premium and valued at more than 160 million US dollars. “Claims in 2012-2013 jumped by 2–3 times, and the value exceeded 160 million dollars, if I m not mistaken. 160 million dollars is not a small figure,” he said. Rezki explained that insurance enables oil and gas contractors to focus on production targets without worrying about unforeseen asset damage costs. Without protection, every operational incident becomes a direct burden on the state through the cost recovery mechanism. “In other words, this is an important matter and a necessity for us at SKK Migas to secure these assets through insurance,” he said. The need for asset protection is becoming more urgent as drilling activity increases. Rezki revealed that the number of wells drilled rose from 200-300 wells per year to almost 1,000 wells in 2022-2023. He stressed that without adequate insurance protection, incidents such as blowouts could inflict very fatal financial losses on the national oil and gas industry. “As assets grow and will continue to grow, protection becomes more necessary,” said Rezki.