Oil price increase to boost new investments: Analyst

JAKARTA (JP): Increased oil prices on the world market, nearing US$20 per barrel last week, will encourage new investments in Indonesia's energy sector, an oil analyst said.

"I think oil investors will see that now is a good time for them to expand their exploration and production activities," Suyitno Patmosukismo, a former director general of oil and gas, said at the opening ceremony of the Jakarta '96 International Geophysical Conference and Exposition yesterday.

Last week, the average oil price of the Organization of Petroleum Exporting Countries (OPEC)'s 12 members, including Indonesia, was recorded at almost $20 per barrel on the world market.

Indonesia's Minas crude oil, for example, was recorded last week at $19.33 per barrel, almost $3 above the $16.50 set by the government for the calculation of its 1996/97 budget, noted Suyitno.

The present director general of oil and gas, Soepraptono Soelaiman, shared Suyitno's view, saying that there are currently four oil investment contracts in the waiting.

"For the current fiscal year (starting in April) we have four new production sharing contracts with foreign investors that are ready to be signed," Soepraptono said, adding that the government is expecting more new contracts.

"There are several oil companies that have expressed their interest in investing in Indonesia," he said.

He attributed the conducive investment conditions to the world price of $19.33 per barrel, which exceeds the country's average production cost of $13 per barrel.

According to Soepraptono, oil exploration costs in deep sea and remote areas is between $8 and $10 per barrel. This does not include the capital cost of about $3 per barrel.

"Therefore, we can say that oil investors will turn a profi if they can sell their oil at $17 per barrel," he said.

In the western part of the country, he added, the exploration cost could be between $4 and $6 per barrel.

Soepraptono said that oil prices are now reaching their peak. "They are not likely to drastically drop or increase," he noted.

"The highest probability is that prices will level off for some time before dropping slightly and then recovering. The other possibility is that they will slightly drop for some time before recovering to their original level.

"I think oil prices will average above the government-set price of $16.50 per barrel during the current fiscal year," noted Suyitno.

He said that the upward trend could continue until next year because during the ongoing spring and summer seasons, Europeans and Americans will travel a lot. They will need more gasoline for transportation and during the winter and autumn they will need more for heating.

The International Geophysical Conference, open until May 2, is organized by the Indonesian Association of Geophysicists, the Society of Exploration Geophysicists, the Australian Society of Exploration Geophysicists, and the European Association of Geoscientists and Engineers.

The conference will present the latest developments in geophysical technology from 107 papers, which cover a wide range of geophysical applications in oil exploration, mining and geosciences. (13)