Doubts linger over govt's oil production target

Doubts linger over govt's oil production target

Leony Aurora, The Jakarta Post, Bandung

Analysts and industry players have expressed a wide range of
views over the government's target of raising the country's oil
production to 1.3 million barrels per day (bpd) by 2009, with
some saying it would be challenging and others saying it would be
downright impossible.

The government needed to come up with new breakthroughs and
out-of-the box thinking if it wanted to attain the optimistic
target, the panel of speakers and prominent members of the
audience said at a symposium titled "To raise Indonesia's oil and
gas production", which was held here by the Association of
Petroleum Engineering Experts (IATMI) last Friday.

Such approaches had to be taken to encourage exploration, which
had more than halved since 1998 as investors waited for the
country's turmoil to subside and for the implementation of the
new Oil and Gas Law, president of Chevron Pacific Indonesia (CPI)
Wahyudin Yudiana said.

"It's a pity that we could not raise production amid the
current high oil prices," said Yudiana, whose company produces
some 50 percent of Indonesia's total crude output.

The government could offer incentives to promote joint
exploration in eastern Indonesia, where most of the unexplored
basins are located, to major existing producers like Chevron,
ExxonMobil, ConocoPhillips and BP.

"If one major find is discovered, the areas around it will
become attractive," said Yudiana.

Panelist TN Mahmud, former CEO of Arco Indonesia, suggested
that the government form a crisis team that would report directly
to President Susilo Bambang Yudhoyono to coordinate efforts to
boost exploration and restore investor confidence.

The target of 1.3 million bpd by 2009 is unrealistic, he said.
"We have lost the momentum in recent years," said Mahmud. Even if
there were coordinated national efforts taken right away, the
results would only become apparent five years down the track.

It would be impossible to repeat the experience of the late
1960s, when, within five years, the oil and gas sector saved the
state budget after the country faced near bankruptcy. The Local
Autonomy Law and investors' disappointment with the state's
failure to honor the sanctity of the contract in the past were
cited as being among the reasons for this.

According to figures from the Upstream Oil and Gas Regulatory
Agency (BP Migas), some 80 percent of crude and condensate
output, which this year is estimated to average at 1.075 million
bpd, comes from fields that have passed their peak production.

Indonesia's oil production is declining by 5 percent annually
due to aging fields and lack of exploration.

BP Migas chairman Kardaya Warnika said at the event that the
agency was making various efforts to boost production and called
the government target "quite difficult but not impossible".

In the next three years, the agency will fast-track
processes, applying special licenses that will enable some work
to start before the plan of development (POD) is approved and
providing incentives for "brown" fields, said Kardaya.

"We will also speed up the development of the Cepu block and
conduct enhanced oil recovery efforts," he added, referring to
the country's largest untapped oil reserves that are currently
the subject of a prolonged dispute between state oil and gas firm
PT Pertamina and ExxonMobil.