Expert describes revised RI oil price forecast as feasible

Expert describes revised RI oil price forecast as feasible

HONG KONG (Dow Jones): Indonesia's budget forecast of US$13 per barrel crude oil -- a critical assumption in the government's revised budget -- appears feasible if world oil prices rise as expected, said an oil industry consultant yesterday.

"It's a fair figure given the fact that people are expecting the (international) crude price to firm up toward October," Farooq Qureshi, Singapore-based oil consultant with Arthur D. Little, said.

World oil prices are expected to rise in the third or fourth quarter, following a June agreement among world oil producers inside and outside the Organization of Petroleum Exporting countries, to cut global production by 3.1 million barrels a day starting July 1. Indonesia's main export crudes, Minas and Duri, are currently quoted at about $12.95/barrel and $11.25/barrel, respectively.

Early Thursday, the Indonesian government released a revised budget for fiscal year 1998-99, forecasting a 43 percent rise in oil and gas revenues to Rp 49.71 trillion from the previous budget estimate of 34.58 trillion. Indonesia's budget forecast is based on a $13 per barrel estimate for a basket of Indonesian crudes, and assumes an exchange rate of 10,500 rupiah to the U.S. dollar. (The U.S. dollar is currently at about Rp 13,000.)

Despite the collapse of international crude prices in the first half, the magnitude of the rupiah's collapse from a year ago is far greater, boosting Indonesia's oil revenues in rupiah terms.

Indonesia also appears set to boost oil production marginally.

The budget forecasts oil production at 1.52 million barrels per day, appearing to violate Indonesia's commitment, as a member of the Organization of Petroleum Exporting Countries, to reduce output to 1.28 million barrels per day from July 1 basis its February output of 1.38 million b/d.

In June, the International Energy Agency estimated Indonesia's output at 1.33 million b/d. Indonesia is a net oil exporter and the only Asian member of OPEC.

Qureshi added that the higher production forecast reflects a government desire for higher dollar-denominated revenues.

"Within Pertamina there is a major push to increase oil production ... but they don't have the money to do that now," said Qureshi. "Now the message for the other producers (in Indonesia) will be to enhance their production."

However, another industry source added that Indonesia's goal of boosting production isn't feasible. Indonesia is said to be pumping oil at maximum capacity, unable to expand production due to a shortage of capital amid the financial crisis.

"It's not a concern to OPEC because Indonesian exports don't have a big impact on the market (because they aren't a big exporter), especially not the market in the western hemisphere," said the source. "In the great scheme of things they are not very important -- they can't increase production even if they try."

Oil and gas production is mainly through production sharing contracts between Pertamina and units of foreign oil companies.

PT Caltex Pacific Indonesia, a joint venture between Chevron Corp. (CHV) and Texaco Inc. (TX) and Maxus Southeast Sumatra, a unit of Maxus Corp. (subsidiary of YPF SA of Argentina) account for about 64 percent of Indonesia's oil production.