Oil exploration slows: BP Migas

Oil exploration slows: BP Migas

The Jakarta Post , Jakarta

Oil and gas exploration activities in the country have been on
the decline in recent years, as investors have postponed
investment plans due to unfavorable fiscal policy and uncertainty
in the regions.

Oil and gas upstream regulatory agency (BP Migas) head Rachmat
Sudibyo said some investors that had obtained new contracts
decided to suspend exploration activities because of problems
with local communities and the government's new fiscal policy.

"Although they have obtained new contracts it has not been
easy for them to start exploration because of these issues,"
Rachmat said on Friday.

According to the latest BP Migas data, only 75 oil wells were
drilled of a planned 117 in 2002. Some 112 oil wells were planned
for exploration in 2003 but only 54 were drilled. This year, 114
oil wells are planned for exploratory drilling but as of June,
only 19 had commenced.

New exploration is important to maintain both annual
production rates and a reserve availability for future
consumption.

One of the main problems that slowed down exploration
activities was the government's decision to drop the lex
specialis tax policy for the mining industry.

The previous policy provided investors with duty-free
facilities for importing materials used in oil and gas
exploration and production activities.

"Investors are confused because they have to pay tax even
before they obtain oil or natural gas from exploration. So they
put their exploration on hold until this issue was sorted out,"
Rachmat said.

In the past, investors paid taxes if exploration was
successful in producing oil or natural gas.

The Ministry of Energy and Mineral Resources and the Ministry
of Finance are still discussing the issue.

The tax policy also prompted the government to delay putting
to tender 10 oil and gas blocks this year.

Land disputes with local communities are also another problem
facing investors in regions, Rachmat said.

"It is difficult to free sites for exploration activities in
the regions," he added.

Rachmat warned that delays in exploration would affect the
country's future crude oil production.

According to the BP 2003 Statistical Review of World Energy,
Indonesia produced 1.179 million barrels (mb) of crude oil and
condensate. It was much lower than the 1.288 mb and 1.389 mb in
2002 and 2001 respectively.

Currently, oil production is well below the output target set
by the Organization of Petroleum Exporting Countries (OPEC), of
which Indonesia is the only Southeast Asian member country.

Ibox

Programed and realized exploratory drilling

Number of wells
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2001 2002 2003 2004
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Planned exploration 144 117 112 114

Realized exploration 87 75 54 19
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Source: BP Migas