Indonesia making headway on higher oil and gas production

Ika Krismantari, The Jakarta Post, Jakarta

Upstream oil and gas regulator BPMigas says it is upbeat about achieving next year's oil production target, although this year's output expectations will not be achieved.

BPMigas deputy chairman Abdul Muin said recently that next year's target of 1.034 million barrels of oil per day was achievable on the back of an expected increase in the production of the country's major oil producer, Chevron, and the coming onstream of new oil fields.

He said that Chevron, which produced about 415,000 barrels of oil per day this year -- almost half of the country's total production -- was expected to be able to raise output to 441,000 barrels per day.

"We will still be relying on Chevron for oil production next year," Muin said on the sidelines of the Energy and Mineral Resources Ministry's year-end meeting Friday. "What they (Chevron) need to do is just keep adding more wells and maintain (production from) their mature fields."

The production target for Chevron is higher than that stated during a hearing between the agency and the House of Representatives recently.

During the meeting, the agency stated that Chevron would still be the main contributor to national oil production in 2008 on 426,300 bpd, followed by Pertamina on 135,600 bpd, US-based ConocoPhillips on 59,400 bpd, Inpex on 47,900 bpd, CNOOC on 47,900 bpd and Total Indonesia on 45,000 bpd.

In addition, the agency is hopeful there will be additional production from 22 newly developed oil blocks, which are expected to begin commercial production next year, Muin said.

Of these 22 blocks, 10 are new blocks, including North Duri and Kotabatak in South Sumatra, Bekapai, Handil and Tunu 11A in East Kalimantan, Pulau Gading and Sungai Kenawang in Jambi, and Tangguh in Papua.

Pertamina upstream director Sukusen Soemarinda has also said that the state firm is upbeat it can increase its production by 24.5 percent next year to 180,751 bpd, from 145,149 this year.

Sukusen said that he expected that the additional output would come from the company's Sukowati block in East Java (24,000 bpd), Poleng block in East Java (12,000 bpd), Pondok Tengah block in West Java (6,000 bpd) and Cepu block (10,000 bpd).

However, many are skeptical about this target given the fact that production in most existing oil fields is declining due to depleting reserves.

According to data from the ministry, Indonesia only produced 910,000 bpd this year, compared to the original target of 950,000 bpd, due to maturing fields and a lack of exploration work.

This clearly shows that Indonesia is suffering declining oil production from year to year, with output falling from 1.34 million bpd in 2001 to 910,000 bpd in 2007.

To help facilitate oil and gas operators intensify their exploration work, Finance Minister Sri Mulyani Indrawati said her ministry had issued decrees exempting operators from paying import duties and taxes on drilling equipment.

She said that the decrees would become effective on Jan. 1, 2008.

In addition to fiscal incentives, the government has also promised to give explorers as much as 40 percent of oil and gas production from the areas offered in the latest round of bidding in October so as to meet the higher production target in the coming years.

Oil and gas companies will get between 15 percent and 35 percent of oil output, and between 30 and 40 percent of gas sales, the energy ministry said recently.

Indonesia is seeking companies to explore 26 oil and gas areas to reverse a decade-long trend of declining production as existing fields are depleted.

Explorers that win the Mahakam Hilir area in East Kalimantan province and the North X Ray block offshore Java will get the smallest production share of 15 percent for oil. But those interested in the Semai blocks offshore Papua, the country's easternmost province, will get as much as 35 percent from oil production, and 40 percent from gas production.

Twelve exploration areas in the 26 oil blocks will be offered through a tender, and the remaining 14 through the direct-offer system, where explorers identify the fields they want to develop and the government advertises for rival bids, the energy ministry said.