RI may become an oil importer as output slides

RI may become an oil importer as output slides

Claire Leow and Grace Nirang Bloomberg/Jakarta

Indonesia, Southeast Asia's only OPEC member, may become a net oil importer this year as projects led by ConocoPhillips, Unocal Corp. and PetroChina Co. fail to stem falling output, helping to boost fuel prices to records.

The country may turn to importing a net 61,000 barrels a day this year from net exports of 27,000 barrels a day in 2004, based on figures in a document prepared for the Energy and Mineral Resources Ministry and obtained by Bloomberg.

Indonesia is draining oil from global markets at a time when China's soaring demand helped to push prices to a record US$58.28 a barrel on April 4. To revive exports, President Susilo Bambang Yudhoyono must resolve contract disputes that have curbed spending by companies including Exxon Mobil Corp.

"Without new investments, Indonesia will this year probably end up as a net importer of oil," Wahyudin Yudiana Ardiwinata, 55, chief executive of ChevronTexaco Corp.'s local unit, PT Caltex Pacific Indonesia, said in an interview on Wednesday in Jakarta.

Caltex pumps half of Indonesia's oil.

Global oil prices have reached records because of limited spare output capacity among OPEC's members and increased demand from China, whose imports have risen over the past decade from zero to 41 percent of local consumption. Domestic production has failed to keep pace with demand that more than doubled to about 6.38 million barrels a day in 2004.

In Indonesia, projects led by ConocoPhillips, Unocal and PetroChina won't produce as much oil as expected this year, the energy ministry document said.

Oil imports in 2005 may jump 15 percent to 472,000 barrels a day, while exports are likely to drop 6 percent to 411,000 barrels a day. Last year, exports were unchanged at 437,000 barrels a day, as imports climbed to 410,000 barrels a day from 362,900 barrels a day.

Indonesia's production of oil and condensates slid to 1.1 million barrels a day in February from 1.67 million barrels at its peak in 1976-1977.

Meantime, Exxon, the world's biggest publicly traded oil company, may stall development of Cepu, Indonesia's largest untapped oil deposit, for a fourth year because the state oil company, PT Pertamina, is demanding a bigger stake before extending a project license.

Exxon's dispute is among the factors that cut oil exploration spending to a 23-year low, or less than $500 million in 2004, according to the Indonesian Petroleum Association's data.

Another reason: ChevronTexaco and the association's 39 other active members want payment of about $200 million in refunds for value-added tax going back as far as 2001, disrupting budgets and undermining confidence in the administration.

Oil and gas last year accounted for 26 percent of the Southeast Asian country's export revenue, which rose 15 percent to $11.8 billion on higher international prices, according to BPMigas, the state oil and gas regulator.

Lower production this year could cut government revenue as it strives to trim a budget deficit that's forecast to continue each year until 2008.

"Oil and gas is a particularly tough one -- if it's not sound, it's bad for the budget," William Wallace, lead economist for the World Bank in Jakarta, said in a telephone interview. "Also for the investors."

Exxon's Cepu deposit in central Java may have hold about 500 million barrels of oil, according to the energy ministry. The field could produce 170,000 barrels a day, Budiono, vice president for exploration at Exxon's Indonesian unit, told a parliamentary hearing on Feb. 17.

Before that, Exxon and Pertamina must resolve a dispute that has festered through three Indonesian presidencies since 2001.

That year, parliament enacted a law to bring an end to the type of so-called technical assistance contract that gave Exxon a license until 2010 to develop Cepu with Pertamina. Exxon's request for a 20-year extension of its right to 20 percent of any oil produced from Cepu was refused by the government in 2003.

A counter-offer by Pertamina for Exxon to pay $85 million and give up its right to two neighboring fields in exchange for the Cepu extension was retracted in August last year, when the government appointed new directors at the state oil company.