More incentives needed to promote oil industry

JAKARTA (JP): The government should increase incentives for oil explorers in eastern Indonesia, former minister of mines and energy Subroto said yesterday.

"The current incentives are apparently not enough to encourage oil investors to explore for oil in frontier areas," he said.

Subroto, who is also the former secretary general of the Organization of Petroleum Exporting Countries (OPEC), was speaking after addressing a luncheon on The Energy Outlook in the Asia Pacific Region which was organized by the Indonesian Executive Circle.

He said many oil investors preferred to explore in countries like Vietnam, Mongolia and other central Asian nations.

"I don't think they do it only because of geological conditions which makes exploration cheaper. It has to do with a better investment climate," he said.

Subroto said eastern Indonesia had a reserve of about 60 billion barrels but not many investors wanted to explore there because there were not enough incentives.

The Indonesian government, through the state oil and gas company Pertamina, offers a production sharing scheme of 65:35 in frontier areas -- mostly in eastern Indonesia -- compared to the normal 85:15 split in other areas. The splits are in Pertamina's favor.

Pertamina is also offering case-by-case incentives to oil contractors in remote areas.

Subroto urged the government to improve bureaucratic procedures in the energy business.

Asia Pacific

Subroto said that according to the British Petroleum Statistical Review of World Energy in June 1995, Asia Pacific oil consumption would increase over the next several years.

In 1998, oil consumption will reach 21.3 million barrels a day.

By 2000, consumption is projected to reach 23.5 million barrels a day.

But Subroto said Asia Pacific crude oil production was unlikely to increase sharply.

"Only China and Vietnam are projected to significantly increase their oil production, judging from their current exploration and development activities," he said.

"As a result, crude oil production in the region will not increase very much from the present production of 6.76 million barrels a day," he said.

In 2000, Asia Pacific oil production is estimated to remain at 6.7 million barrels a day, while consumption will increase to 23.5 million barrels a day, implying 16.8 million barrels a day will need to be imported, he said.

He said the logical oil supply for this region would be the Middle East where production capacity had to be increased. This relationship would strengthen economic links between the two regions.

"Asian countries will be more and more involved in the financial and technical requirements of developing Middle East production capacity, while the Middle East oil producing countries will enhance their interest in being active in the downstream development of Asia," he said. (bnt)