Indonesian oil industry to face difficult times
Indonesian oil industry to face difficult times
JAKARTA (JP): Chairman and chief executive officer of Chevron
Corporation Kenneth T. Derr has asked Indonesia to prepare for
difficult times as a result of the steady downward trend in oil
prices and increasing global competition in oil industry.
"Indonesia's greatest challenge isn't the geology underground,
but the competitors around the world who are going to great
lengths to attract oil company investment," he told the
Indonesian Petroleum Association's 24th annual convention at the
Jakarta Convention Center on Tuesday.
Derr said that Indonesia should look at the new competitors,
including Russia and China.
He said that many OPEC countries previously closed to private
investment, like Venezuela, Kuwait and Iran, are now open for
private investment.
"Many of Indonesia's neighbors in Southeast Asia -- Papua New
Guinea, Vietnam, Malaysia and Australia -- are aggressively
pursuing capital and technology from private investment," added
the chief of Chevron, which, together with Texaco, owns
Indonesia's largest oil producer, PT Caltex Pacific Indonesia.
Derr said that the challenges for Indonesia include oil
prices, which seem to be stuck in the US$16 to $18 per barrel
range, and falling exploration expenditures, which have declined
by almost one-half in the last ten years.
Indonesia has to face the possibility that it may become a net
importer of crude oil in the next century and that its revenues
from oil and gas will to decline from 24 percent to 14 percent of
the total budget income.
At the same time, Derr said, relatively low oil prices have
restricted investment budgets for companies like Chevron itself,
which has to be selective and prioritize its investment
opportunities.
He said that Indonesia should face the challenges by making
changes, adaptions and adjustments to maintain its
competitiveness.
Indonesia should think about the possibility of rejuvenating
the industry through the creation of what Derr called a 'new
production sharing contract'.
The concept would consist of tax consolidation, additional
incentives for marginal field development, a mechanism for
divestment and a streamlining of the government management
system.
Such tax consolidation may stimulate exploration by permitting
operating companies to deduct the costs of frontier exploration
from taxable income generated by producing operations, he said.
"These types of changes could help Indonesia meet the
challenges in the future," he said.(04)