Oil, gas exploration lower than expected

Leony Aurora, The Jakarta Post, Bandung

Despite the soaring oil prices, exploration activities in Indonesia remain low at between 60 percent and 75 percent of the plans submitted to the government, which seems to indicate less enthusiasm from the players in the sector.

Two-dimensional seismic monitoring had covered 10,371 kilometers (km) as of Nov. 28, compared to the planned 17,207 km and 13,497 km in the previous year, chairman of the Upstream Oil and Gas Regulatory Agency (BP Migas) Kardaya Warnika said over the weekend.

While three-dimensional seismic monitoring this year was recorded at 3,944 km, higher than the 2,606 km last year, but only around 75 percent of the 2005 plans. Some 62 exploration wells were drilled throughout the year, but 81 were planned.

"The intensification of exploration activities are not on a par with the high number of new working areas (signed)," Kardaya said at a press briefing on the sector's performance this year.

"This shows that most new players are not prepared for the high-risk, capital-intensive activities (of exploration)."

Last year, the government signed 19 production sharing contracts (PSCs), comprising to 16 new ones and three extensions. This year, Indonesia has signed 11 new PSCs and five extensions, and there are plans to make public the results of this year's regular tender of blocks in late December. Most of the contractors awarded with blocks through the direct-offer mechanism in October were local newcomers.

Indonesia is in dire need of new oil discoveries as output, of which 88 percent is produced by mature fields, is continuing to decline. The country has averaged 1.06 million barrels per day (bpd) in output of crude and condensate this year, slightly lower than the target of 1.075 million bpd forecast in the revised state budget for 2005.

As of Nov. 28, the daily average output was 1.061 million barrels, Kardaya said.

"Some fields shut down for maintenance and we also faced tight competition to secure equipment as everybody wants to look for oil amid the soaring prices," said Kardaya, citing other reasons for the below-target production.

"(The output) is still within an acceptable range from the target," he added.

According to BP Migas data, gas production this year also declined by 3 percent to 8.16 billion cubic feet per day (bcfd) from 8.41 bcfd recorded in 2004.

As of January 2005, Indonesia's proven oil reserves were recorded at 4.1 billion barrels, lower than 4.3 billion recorded at the same period the previous year, while proven gas reserves were at 97.3 trillion cubic feet (tcf) and 94.8 tcf, respectively.

Throughout this year, contractors discovered total reserves of 134.6 million barrels of oil and 3.6 tcf of gas.

Most of the new discoveries were made in current production areas, while the deep sea and untouched basins, many in less- developed eastern parts of Indonesia, remain untouched.

To boost exploration in the virgin areas, which can only be done by major multinational oil firms with sufficient money to spend, BP Migas suggested that existing major companies form a consortium to pool their budgets and expertise.

"The consortium may be presented with incentives for going into unexplored basins," said Kardaya. "Without going there (virgin areas), we won't develop much," he added.

BP Migas has already conducted talks with the government and oil companies, said Kardaya, without mentioning a specific timeline for the plan to materialize.