Wed, 18 May 2011

From: The Jakarta Globe
By Ririn Radiawati Kusuma

Upstream oil and gas regulator BPMigas plans to summon the country’s oil companies to seek an explanation on their failure to meet oil production targets this year, a top executive said.

“BPMigas will call the oil producers that failed to meet their production targets due to unplanned shutdowns,” BPMigas chairman Raden Priyono said over the weekend.

Unplanned shutdowns, he said, included halted production caused by aging facilities, power supply shortages, damage to pipelines and other problems.

The government’s oil production target for 2011 was 970,000 barrels of oil per day. After the first quarter, though, production had only reached 899,456 bpd, or 93 percent of the target, leaving a deficit of 62,355 bpd. Shortfalls in production force the government to import more oil or further tap its strategic reserves.

Ibrahim, an analyst at Harvest International Futures, said unclear contracts with the government, land acquisition problems and delays in drilling were the main culprits in the country’s falling oil production.

He pointed to the oil project in Cepu, Central Java, which has had problems with land acquisition and drilling delays by Chevron Pacific Indonesia.

“Aside from that, the government is still relying on old oil resources,” he said, referring to wells that have been explored for 30 years or more.

BPMigas released a document during the weekend that showed 30 percent of the first-quarter deficit was caused by unplanned shutdowns.

Out of 148 registered oil and natural gas companies in Indonesia, the document showed, 32 failed to meet their targets set in the 2011 state budget. Among them are state oil and gas firm Pertamina, Chevron Pacific Indonesia and ConocoPhillips Ind.

Government officials, including Coordinating Minister for the Economy Hatta Rajasa, have said Indonesia plans to reach 1 million bpd by 2012 at the latest. However, BPMigas and industry analysts panned the projection as being out of reach. The country did not meet its target last year, either, setting a goal of 965,000 bpd but only producing 954,000 bpd.

Pertamina EP spokesman Agus Amperianto said on Tuesday that the company was prepared to explain why it failed to reach its production target. He said unplanned shutdowns were not the only problem.

“The most important thing is overlapping when we try to drill more wells on our oil and gas blocks,” Agus said.

Pertamina EP expects to drill 147 new wells this year, he said, but only managed to drill 25 in the first quarter.

He went on to say that BPMigas needed to coordinate with state department, such as the Forestry Ministry, on issues that are slowing down oil production.

“Oil companies always trying to meet their target. We are seeking BPMigas’s support for our efforts to ramp up our production,” Agus said.

CPI spokeswoman Santi Manahutu denied reports of poor performance. “The problem has long been taken care of. The data is old,” she said.

BPMigas data showed CPI missed its 370,000 bpd target by more than 10,000 bpd.

Representatives for ConocoPhillips and Total E&P Indonesie were not available for comment.

South Korean firm Kodeco Energy will not be summoned despite being on BPMigas’s list. It lost its right to operate the West Madura block when its contract expired on May 7, when the government agreed to let Pertamina take an 80 percent stake and operate the block.