Alfian , The Jakarta Post , Jakarta | Wed, 10/08/2008 10:35 AM | Business
The U.S.-led global financial crisis may take its toll on small to medium oil and gas projects in the country, upstream oil and gas operator BPMigas said Tuesday.
R. Priyono, head of BPMigas, said most medium to small operators, usually producing 5,000 to 10,000 barrels of oil per day, are financed by private equity firms or other financial institutions dependent on global financial sources.
"As stocks worldwide are declining, these companies may face difficulties in securing their financing needs," Priyono said, adding they might start feeling the pinch next year as a result of the global financial turmoil.
Most of these medium to small players are consortia formed by similarly medium to small local firms cooperating with foreign companies, also of modest size.
According to Priyono, projects by such companies contribute between 20 to 30 percent of total investment in oil and gas, expected to reach US$14.8 billion by the end of the year.
With a lot at stake, Priyono said the agency would stand ready to give support in anyway that it could. "BPMigas will talk to financial institutions and ask whether they can help these companies."
The Bank Indonesia Governor Boediono (of the central bank) said Sunday that the financial crisis would cause liquidity shortages for domestic companies and for the government account.
Given this tight liquidity, companies will face greater difficulties in seeking expansion loans. They will also be hard-pressed to pay overseas debts due to high refinancing costs.
Things however could be a bit easier for large companies working on large projects, Priyono said.
"As of today we have no reports about them facing a slowdown," he said.
He pointed as an example to an oil and gas project in Cepu block, East Java, to be jointly run by U.S. energy giant ExxonMobil Corp and PT Pertamina EP, a subsidiary of state oil and gas firm PT Pertamina.
"The Cepu project will not be affected by the crisis. The operators have even promised to speed up the project."
Cepu is expected to start producing 20,000 barrels per day (bpd) next year. At its peak, the block could produce up to 130,000 bpd of oil, or around 15 percent of the nation's total oil output.
Pertamina, the biggest domestic oil and gas operator, says the crisis has had no impact their operations, so far.
"Our activities, both upstream and downstream, remain normal. Most of the financing for our projects comes from Japan and the Middle East," president director Ari Soemarno said Monday.
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