Pertamina urges brief closure of high-cost wells

JAKARTA (JP): State oil and gas company Pertamina will request that its contractors temporarily close high-cost oil wells in an efficiency drive to compensate for the slump in oil prices.

"No oil fields will be closed but contractors will be asked to temporarily close some high-cost wells in their fields as part of efficiency programs," Pertamina's head of supervision of foreign oil and gas contractors Gatot K. Wiroyudo said on Tuesday on the sidelines of the seminar Oil and Gas Industry in the Reformation Era.

Dozens of the sector's executives attended the seminar.

Gatot refused to reveal how many wells would be temporarily closed.

The measure is also part of the government's effort to meet the country's output quota of 1.28 million barrels per day (bpd), set by the Organization of Petroleum Exporting Countries (OPEC).

Prices have dropped to the one digit level over the past week following OPEC's failure to formulate measures to stop the decreasing trend in oil prices since early this year.

Sumatran Light crude, also called Minas, and Duri crude were quoted at US$9.60 and $8 per barrel respectively last week.

Minister of Mines and Energy Kuntoro Mangkusubroto has called on the country's oil industry to boost efficiency to maintain enough margins for themselves and the government amid the price slump.

Kuntoro reiterated the call at the seminar.

"We need to find ways to raise our efficiency and reduce costs," Kuntoro said in his speech read by his expert staff for oil and gas affairs Rachmat Soedibyo.

According to Gatot, production costs of the country's oil wells currently average between $2.5 and $3.5 per barrel but some wells, especially in remote areas, have production costs, including overheads, of more than $7 per barrel.

Gatot said oil contractors were also expected to reduce costs concerning benefits of the pending deregulation in the procurement of services and equipment and deregulation in the licensing of operations.

Pertamina will also request that contractors use state-of-the- art technology, which could reduce costs, and create synergy among contractors in their operations, including through joint production facilities.

Gatot targeted savings on production costs of up to 35 percent in the coming years thanks to the efficiency programs.

Pertamina is also devising measures to reduce oil and gas industry overheads, Gatot said, but guaranteed the overhead- reduction program would not lead to layoffs. (jsk)