New oil reserves expected to boost output by 2004

JAKARTA (JP): The development of recently discovered oil reserves is expected to boost Indonesia's crude oil output by 300,000 barrels per day (bpd) by the year 2004, according to state oil and gas company Pertamina on Wednesday.

Pertamina production sharing management director Iin Arifin Takhyan said that with the new discoveries he anticipated Indonesia's crude oil output to grow to 1.7 million bpd by 2004.

"I don't see the concern of us losing production, in fact we're likely to increase it," he said during a press meeting.

Much of the additional crude oil production would come from the development of the Cepu block in East and Central Java, and the Belanak project in West Natuna, located southeast of the China sea.

Both projects are expected to yield 100,000 bpd each, according to Pertamina.

Iin described the new discoveries as a reprieve in Indonesia's increasing dependence on imported crude oil.

Although Indonesia is a crude oil exporter, the country relies on imported crude oil from the Middle East to feed Pertamina's refineries. Some refineries cannot use local crude oil.

Official data puts Indonesia's crude oil output at 1.4 million bpd, but a steady output decline in marginal fields and security problems have strained production.

Indonesia's largest oil producer PT Caltex Pacific Indonesia complained that prolonged security problems have led to an output decline of 40,000 bpd this year.

Caltex cited frequent run-ins with locals, the latest being job seeking youths blockading one of its oil wells, as affecting production.

At present, Pertamina is hardly able to maintain its output quota of 1.255 million bpd as set by the Organization of Petroleum Exporting Countries (OPEC). A report by Middle East Economic Survey last Monday, cited Indonesia's oil production at 1.22 million bpd.

Since the late eighties analysts have warned that Indonesia might become a net crude oil importer over the next ten years.

They argued that high fuel consumption drained oil reserves faster than Pertamina was able to find new ones.

So far, Indonesia has been able to avoid that scenario with a string of new oil discoveries and technologies that have enhanced the oil recovery rates of existing fields.

In mid-March, the U.S. based oil and gas company ExxonMobil Oil Indonesia Inc., announced it had discovered oil in the Cepu block, with a proven reserves of 250 million barrels.

Production could start as early as 2003, according to an ExxonMobil official, with Iin expecting output at 100,000 bpd by 2004.

Oil and gas company Conoco Indonesia Inc. of the United States is developing the Belanak project in West Natuna, located in the South China Sea, from which Pertamina anticipates another 100,000 bpd.

Conoco spokesman A.R. Dudung Natanegara said volume may not reach 100,000 bpd in the first year of production in 2004.

"There will be a ramp up period first, though I can't tell how long it'll take to reach the full production rate," he said.

Aside from Cepu and Belang, some 60,000 bpd is to come from the development of the West Seno project in the Makassar Straits by Unocal Indonesia Co. It is Indonesia's first deep water oil project, with production also slated for 2004.

Iin said other smaller fields are in development that collectively would pose a substantial boost to Indonesia's crude output.

Indonesia is also eyeing more gas sales to Malaysia, after both countries agreed last year to a 20-year contract for the total supply of 1.5 trillion cubic feet of natural gas worth $6.2 billion.

A second deal is expected to come from West Natuna's A block operated by British oil and gas company Premier Oil Indonesia Ltd.

Initial talks set supply at 100 million cubic feet of gas per day (mmcfd) under a 10-year contract with Malaysia's state-owned oil and gas company Petronas. Government revenue is anticipated at some $446.4 million.

A third deal with Malaysia could come from gas fields in South Sumatra operated by a consortium of Gulf Corridor Block, Pertamina Jambi, JOB YPF Jambi Merang, and Santos Bentu Block.

Iin said that in initial talks, Petronas agreed to a supply of 300 mmscfd over 20 years starting in 2004; worth $4.5 billion in government revenue.

The fourth potential opportunity for gas sales to Malaysia comes from ExxonMobil's East Natuna gas fields. Iin, however, said talks were still at a very early stage. Petronas may purchase 1 billion cubic feet of gas per day starting 2010. (bkm)