Indonesia, Southeast Asia’s biggest oil producer, has failed to meet its investment target for the oil and gas sector because contractors cut spending as the economic slowdown brought record-high crude prices crashing down and reduced energy demand, upstream energy regulator BPMigas announced on Wednesday.
The regulator said oil and gas investment this year had fallen 10 percent to $10.87 billion, just 72 percent of the target of $15.11 billion, as energy firms increased efficiency while cutting back on exploration. The 2008 goal had been $14.9 billion.
“Most contractors decided to halt drilling activities because they are waiting for the economic recovery,” said Priyo Widodo, the regulator’s treasury chief.
The government set investment goals of $11.9 billion for production and $3.21 billion for exploration, but realization only reached $9.97 billion and $898 million, respectively. Despite falling short of the mark, the state has set an even higher target for 2010 at $15.98 billion, consisting of $13.62 billion for production and $2.36 billion for exploration, said Anditya Maulana, BPMigas’s head of exploration.
Raden Priyono, head of BPMigas, said he doubted the 2010 target was reachable, especially since cost recovery had been capped. “As long there is still a cap on cost recovery, the investment target is unlikely to be met.”
The government has capped cost recovery at $12 billion next year, resulting in investors shying away from oil and gas tenders this year. Cost recovery is how contractors are reimbursed for expenses incurred in the development and operation of energy assets. It is central to the government’s system of production-sharing contracts.
BPMigas also reported oil output was 948,580 barrels per day in 2009, short of the target of 960,000 bpd. The production drop was due to unplanned shutdowns at projects, maintenance issues and even the theft of equipment.
Gas production, however, came in at 7.9 trillion standard cubic feet a day, beating the goal of 7.5 trillion scfd.
The oil and gas sector had revenue of $19.7 billion compared with the targeted $18.8 billion, Priyono added. The oil output target for next year is 965,000 bpd.