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.