Government Wants to Halt Oil and Gas Production Slide

By webadmin on 01:44 pm Jun 11, 2012
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Retno Ayuningtyas & Wiyono

BP Migas is optimistic that the country’s crude oil production will not weaken this year because investment in oil and gas seems to be on the rise.

However, industry analysts warned that to increase production, the government must rearrange its oil and gas system and regulation in order to make it more friendly to investors.

Rudi Rubiandini, deputy of operations at BP Migas, told Investor Daily that the amount of investment poured in by production sharing contractors continued to rise each year.

In 2010 investment in national oil and gas was at $11.03 billion. It rose to $13.59 billion in 2011. But production dropped from 944,000 barrels per day in 2010 to 903,000 barrels per day in 2011.

Rudi, however, said that this drop would be curbed if not eliminated.

“We want to pressure down the reduction rate to at least 2 percent if we cannot completely halt the drop,” Rudi said.

He said efforts had to be taken to conduct further drilling and develop existing sites.

He said production would also rise with the entry into operation of the West Madura offshore Block operated by Pertamina Hulu Energi. The subsidiary of the state oil and gas company Pertamina, currently operates two rigs, with one well yielding 4,000 barrels of oil per day.

“If they get three wells, we estimated that there would be an additional production of 15,000 barrels per day,” he said.

Rudi was optimistic that Indonesia could produce 904,000 barrels per day this year and 910,000 barrels per day in 2013.

The rise, he said will come from outputs from 11 projects and also better production from at least two existing fields — Lapangan Rantau and Talang Jimar, both operated by Pertamina. He added that there would also be an early production facility from the Cepu Block and a rise in production from the Jambi Merang Block.

Meanwhile, oil expert Kurtubi also told Investor Daily he believed the system and regulation in the oil and gas sector was behind the low investment in that sector and the weakening production.

“Therefore our oil reserve has never gone up over 4.2 billion barrels, or will be depleted after 12 years,” Kurtubi said.

He said the country needed a system and regulation overhaul to improve investment competitiveness in the oil and gas sector.

“Make a better and more simple oil and gas law to make it easier for investors to come in and work on oil and gas reserves,” Kurtubi said.

Investment procedures in the field should also be simplified, the lex specialist law reintroduced and investors should be taxed after production starts, he added. He said those moves could hopefully increase reserves to 50 billion barrels if not 80 billion barrels.

BP Migas said the country’s oil and gas reserve continued to shrink, with reserves in 2011 at 4.039 billion barrels. However BP Migas deputy chairman Hardiono said the country has found potential oil and gas reserves totaling 227 million barrels of oil and 5.5 trillion cubic feet of gas in 24 operation areas.

“These new reserves are expected to begin contributing to raise the oil and gas reserve and production in the next five years,”  Hardiono said.

Considering the risks and the high investment needed, investors were still very much needed to develop the oil and gas sector, he said.

Evita Legowo, the director general for oil and gas at the Energy and Mineral Resources Ministry, said the government was currently preparing to make investment in the sector more attractive to investors.

“Production sharing is currently at 85:15, we will provide a better portion,” Evita said. She said that the size of the portion for the investor would depend on the degree of difficulty in the mining operation.

The government was also currently debating waiving land and building taxes for offshore projects.

Investor Daily