Indonesian oil supply may increase next year

Indonesian oil supply may increase next year

SINGAPORE (Dow Jones): Amid economic meltdown, Indonesia's oil and gas drillers have maintained a brisk rate of activity that may increase oil supplies as much as 7 percent in 1999, according to a survey of oil companies in Indonesia by Dow Jones Newswires.

Indonesia's production-sharing contractors appear to be thriving in adversity, faced this year with a host of problems including 12-year-low oil prices, political upheaval and economic recession.

Add to that the Organization of Petroleum Exporting Countries' continuing efforts to reduce crude supplies, and 1998 would seem an unlikely year for the oil industry to expand.

But new investment and increased efficiency hold the potential for an increase of more than 110,000 barrels a day in Indonesia's oil and condensate supplies next year. Indonesia has produced an average of 1.33 million-1.38 million b/d of crude oil so far this year, with additional condensate production of about 200,000 b/d.

Before this year, Indonesia had been forecast to become a net oil importer as early as 2003 owing to declining output and rapid demand growth. But the economic crisis has slashed oil demand by an estimated 15 percent this year, and with recovery expected to take several years oil supply increases would help expand oil exports.

"Given the crucial contribution that oil makes to our foreign exchange reserves we are taking a number of measures to ensure that Indonesia remains a net oil exporter for many years to come," said Mines and Energy Minister Kuntoro Mangkusubroto earlier this week. Kuntoro cited energy conservation and removal of domestic oil product subsidies as ways of maintaining exports.

Supply increases through 1999 would come mainly from oil fields already in production, but by 2001 new developments are on the table for discoveries in deep waters off the coast of East Kalimantan and in Indonesia's Timor Sea zone of cooperation with Australia.

The largest volume of any increase in crude supplies through 1999 would be from the Corridor natural gas pipeline project, which aims free up for sale 50,000-60,000 b/d of Duri crude oil currently burned for steam in central Sumatra. The project is scheduled to commence this month and reach capacity in early 1999.

PT Caltex Pacific Indonesia, which operates the Duri steam- flood project, is considering a similar enhanced oil recovery project to extend the life of the nearby Minas field. Caltex is a joint venture of Chevron Corp. and Texaco Inc.

Further south, Maxus Southeast Sumatra Inc., the country's largest offshore producer, raised production capacity at its main concession this year to 180,000 b/d, or about 29% higher than 1997 production levels of 140,000 b/d. So far in 1998 production has averaged about 150,000 b/d, but it may increase to help the company meet its January 1999 target for producing its billionth barrel. Maxus is a unit of Argentina's YPF S.A.

In Southern Sumatra, Indonesian producer PT Medco Energi plans to raise output from the Kaji and Semoga fields about 10,000 b/d to 30,000 b/d in 1999 as new pipeline connections raise its market access.

In the West Natuna sea, Gulf Indonesia Resources Ltd. plans to bring two new oil discoveries in its Kakap block on-stream in December with a combined production capacity of about 11,000 b/d. Also in the West Natuna area, Conoco Inc. announced a substantial oil discovery this month in the West Natuna area, but officials declined to predict production levels.

Total S.A.'s Total Indonesie unit expects a marginal increase in its current oil and condensate production of about 70,000 b/d from its East Kalimantan fields as a by-product of higher natural gas output for its new liquefied natural gas trains.

Although many production-sharing contractors are cutting their exploration spending amid low global crude prices, Unocal Corp. and Mobil Corp. are maintaining an aggressive drilling campaign in deep waters off East Kalimantan.

Unocal plans to drill at least five of the 50-60 deep-water prospects it has identified by year-end, and it has estimated oil and gas resource potential in just three of those prospects of 345 million-1.09 billion equivalent barrels of oil. The company plans to submit a development plan by the end of the year, with first production targeted early 2001.

In Indonesia's Timor Sea Zone of Cooperation with Australia, Broken Hill Proprietary Co. is planning to develop condensate reserves at the Bayu-Undan field ahead of development of the fields natural gas reserves. Proven and probable condensate reserves are estimated at 400 million barrels, and BHP plans to begin production in late 2001.

The first oil development in the zone of cooperation, the BHP- operated Elang and Kakatua fields, produced as much as 36,000 b/d after commencing in July and is expected to stabilize this month at 32,000 b/d. Indonesia and Australia share equally the government revenue from the zone's oil output.