Oil and gas sector told to boost efficiency in face of price slump

JAKARTA (JP): The government is pushing the country's oil and gas sector to trim costs and whip itself into financial shape for optimal efficiency amid the continued slump in oil prices.

Minister of Mines and Energy Kuntoro Mangkusubroto said on Friday the measure was important because there were no signs the prices would improve in the near future.

"Market and prices are things which we can't control. Oil prices are determined by the free market," Kuntoro said in a weekly news conference.

"What can we do? Cost reductions in the oil and gas sector, reducing bureaucratic hassles, deregulations in licensing and procurement procedures and providing facilities for operation."

Kuntoro said he would hold meetings with the country's oil and gas companies next week to devise ways to boost efficiency.

Prices have continued to fall following the failure of the Organization of Petroleum Exporting Countries (OPEC) to find concrete measures to cope with the slump during its recent ministerial meeting in Vienna.

OPEC has cut its output by 2.6 million barrels per day (bpd) this year after raising its output ceiling by 10 percent to 27.5 million bpd in November last year during a ministerial meeting in Jakarta.

Oil markets had at least expected the grouping to extend the current production cuts of 2.6 million barrels bpd by six months to the end of 1999.

Indonesia's output quota has been cut to 1.28 million bpd.

Brent crude oil fell to US$9 per barrel on Friday while Sumatran Light Crude, also known as Minas, and Duri fell to $9.60 cents per barrel and $8 per barrel respectively.

Traders said market sentiment remained bearish, with expectations that market reaction to single digit prices would be tested in coming sessions.

Kuntoro said the decrease in oil prices was due to the excessive petroleum stock in the market following OPEC's decision last November and persistent quota busting by some OPEC members.

Algeria has sought to convene an OPEC summit meeting to cope with the price crisis, but Kuntoro doubted it would be effective given the excessive oil supplies.

Falling oil prices have hurt Indonesia's budget. Revenues from oil and gas were projected to reach Rp 43.35 trillion, or 87.2 percent of the budget target.

Next fiscal year's budget sets average oil prices at $12.3 per barrel.

Analysts doubt the government can maintain sufficient earnings from oil and gas operations with its planned efficiency program.

Pertamina's data confirms the lowest oil production cost for the previous fiscal year in the country was $2.24 per barrel at Talisman Ogan Komering, a subsidiary of Canada's Talisman.

It was followed by Mobil Oil EP, a subsidiary of U.S.-based Mobil Corp ($2.95 per barrel); Conoco, a subsidiary of U.S-based Conoco ($3.73); Caltex, a joint venture of U.S. energy companies Chevron and Texaco ($4.48); state oil and gas company Pertamina ($5.05); Maxus, a subsidiary of Argentina's state oil company YPF ($5.86); Vico, a subsidiary of Atlantic Richfield Company (ARCO) ($5.1); Total Indonesie, a subsidiary of the French energy company Total ($6.55); Atlantic Richfield Indonesia Inc. (ARII), a subsidiary of ARCO ($7.31); and Golden Spike, a subsidiary of the Kodel Group ($7.63). (jsk)