Purnomo says new govt aims to boost oil output

The Jakarta Post, Jakarta

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Thursday he aimed to increase the country's oil output to more than 1 million barrels per day (bpd) later this year.

Purnomo, who was retained in his Cabinet post under the new administration of Susilo Bambang Yudhoyono, said part of the efforts to achieve the target would be to accelerate the construction of an offshore oil production facility in the Belanak Field on the West Natuna Sea, which is operated by U.S.- based oil and gas firm ConocoPhillips.

Speaking at his inauguration ceremony, he said the new government would also accelerate the bidding process of 15 new oil and gas exploration contracts, which was expected to bring in a total of US$160 million in new investments.

Although Indonesia is a member of the Organization of Petroleum Exporting Countries (OPEC), the country has become a net oil importer since March because of declining oil output. The generally perceived unfavorable business climate has choked investment in the sector.

Among of the negative factors for investing are security problems in the regions, the poor implementation of regional autonomy law, and tax and legal certainty issues.

Indonesia's oil production as of September stood at 966,465 bpd, well below its OPEC quota of 1.3 million bpd.

Asked about the prospects of a fuel price hike at home amid high international oil prices, Purnomo said any plan to cut fuel subsidies and raise fuel prices must be carefully studied they would be unpopular.

Purnomo said he would propose minor cuts on the subsidy, by limiting the price rises to selected fuel products to minimize the impact on the poor.

The previous administration of Megawati Soekarnoputri backed down from an initial plan to reduce the costly fuel subsidies because of fears of possible social and political unrest during the recent seven-month general election process.

But with prices surging to record levels every week, the new government is under strong pressure to reduce the subsidies to help ease burden on the state budget and avoid further harm to the economy.

The rises have meant the previous government had to increase its budget for fuel subsidies this year from initial plan of Rp 14.5 trillion to about Rp 63 trillion.

Purnomo said he would also propose the government review the projected average oil prices of US$24 per barrel used in the 2005 budget prepared by the previous government

With worldwide concerns over supply pushing up prices, the average international price so far this year is $35 and the budget assumption should be adjusted, he said.