Oil and gas contractors to spend US$5.3b

JAKARTA (JP): State-owned Pertamina's oil and gas contractors plan to increase exploration and production expenditures to US$5.3 billion this year, from last year's figure of $4.3 billion, on expectations of a recovery in oil prices after the economic crisis.

Pertamina's head of foreign contractors supervision Gatot K. Wiroyudo said on Wednesday that contractors planned to spend $912 million this year on exploration activities alone, up from $755 million last year.

"Despite slumping oil prices, contractors plan to increase the their budgets for exploration, expecting an increase in oil prices in the next four to five years," Gatot said here during a breaking of the fast meal.

Oil prices have slipped to the one digit level over the past several weeks -- the lowest in two decades -- following an oversupply of oil in the world market and the global recession.

Gatot maintained that the country was still attractive to oil and gas investors despite the economic and political turmoil which has been battering the country for more than 17 months.

He predicted that 20 oil and gas contracts would be signed this year, slightly less than last year's 22 contracts signed.

Foreign contractors account for 95 percent of the country's oil and gas output, with an estimated output of 542 million barrels of oil and condensate and 2.6 trillion cubic feet of natural gas last year.

Gatot said that although some foreign contractors saw their output declining last year, they could maintain their normal production level of 1.5 million barrels of crude per day by developing new production wells in already developed areas as well as in newly explored areas.

"Foreign contractors maintained an output of 1.5 million barrels of oil per day over the past five years," Gatot said.

There are currently 162 production sharing contract areas across the country with a total of 48 operators.

Gatot said Pertamina, as the management holder of all foreign contractors' operations, had been continually seeking to reduce the oil production costs in foreign contractors' operations as part of its efficiency program.

The efficiency program intensified amid collapsing oil prices last year, he said.

Gatot said the program slashed exploration and production expenditures of foreign contractors to $4.2 billion last year from the planned $6.36 billion.

Oil production costs of foreign contractors was down to $2.12 per barrel last year from $2.53 in 1997.

Gatot said slumping oil prices had cut gross revenues from the oil and gas operations of foreign contractors to $11.09 per barrel last year from $14.65 in 1997. The government took 55.3 percent, or $6.1 billion, of last year's revenue.

Gatot said a total 21,250 people are currently employed by foreign oil and gas contractors, including 800 expatriates. (jsk)