Speaking at the SEAPEX 2013 in Singapore Wednesday itsaid some 45%, or over 28bn barrels of oil equivalent of discovered resources,have yet to be produced.

“The key to unlocking this resource is to incentiviseoperators to invest in the remaining, more technically-challenging, projects.”

Craig McMahon, head of Wood Mackenzie’s Asia upstream researchsaid Indonesia is at an important stage in its upstream journey.

“The country remains the region’s largest producer andhas the highest remaining reserves.  It also has access to the bulk ofSoutheast Asia’s deepwater exploration acreage.”

“Yet its production outlook is weak, particularly for oil,and its recent exploration record is poor by regional and global standards.”

“Indonesia still has large tracts of unexplored deepwateracreage and over 130 trillion cubic feet of undeveloped gas reserves.”

“However, far more investment is needed to produce thesereserves, as the easiest and lower-cost opportunities have already beendeveloped.”

Wood Mackenzie says that two main challenges remain to beaddressed in order to reinvigorate Indonesia's upstream sector: the lack ofincentive in its fiscal terms and uncertainty regarding the future of major product sharing contracts.

 “If Indonesia could offer new incentives, there maybe a near-term reduction in tax revenues from oil & gas,” says McMahon.

“However, this would be offset by increased investment anda likely boost to the country’s longer-term production outlook.”

“This has been proven in other countries that havereformed their fiscal policies, attracted new investment and rejuvenated explorationand development activity.”

Wood Mackenzie said regional examples of this includeMalaysia, which is currently experiencing strong levels of industry interestdue to its progressive fiscal terms and recent efforts to encourage developmentof marginal and late-life fields.

Further afield, it says Norway’s efforts to stimulateexploration activity in the 2000s have resulted in a significant boost inlicensing and exploration drilling and a resurgence in its upstream industry.