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BPMigas Warns Oil Firms Over Falling Output
Ririn Radiawati Kusuma | January 08, 2012

Oil production has declined significantly since the so-called ‘oil bonanza’ in the mid-1990s. (Agency Photo) Oil production has declined significantly since the so-called ‘oil bonanza’ in the mid-1990s. (Agency Photo)
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Indonesian oil and gas regulator BPMigas has reprimanded Pertamina, the country’s state oil and gas producer, and the local wing of French oil company Total for falling short of their 2011 production targets.

“The two companies did not produce at the maximum level last year. Their production was way below the target that they were charged” to produce, Rudi Rubiandini, a deputy director for operations at the regulator, said on Sunday.

He didn’t provide a reason for the shortfall in production, but he said that he expected the two companies, which are among 11 oil producers in Indonesia, to increase output this year.

Total was supposed to produce 92,000 barrels per day (bpd) of oil last year but was short by 9,768 bpd, Rudi said.

At the same time, Pertamina was set to produce 132,000 bpd, but actual output was 123,600 bpd, he said.

“I don’t understand what the problems are with Pertamina,” Rudi said. “When we ordered them to [meet the target], they said OK, but they did not do it. They did not meet the target that they had promised.”

Despite the shortfall, Rudi did not provide details on possible sanctions for Pertamina and Total for failing to meet the targets.

Mochammad Harun, Pertamina’s spokesman, said the company has been pressured by the government to produce more than it is capable of. He didn’t elaborate on Pertamina’s oil production capacity.

Total declined to comment.

Indonesia’s oil production reached 903,400 bpd last year, far below the 945,000 bpd set in the state budget, Rudi said. Indonesia is aiming to produce 950,000 bpd this year, according to the state budget.

Like oil, gas production was below target last year, Rudi said. The country produced 8,848 million standard cubic feet per day (mmscfd) last year, 0.4 percent lower than the 8,888 mmscfd in 2010, according to data from the regulator.

Indonesia has tried to boost oil production to one million bpd per day since it left the Organization of the Petroleum Exporting Countries in 2008, when it became a net importer.

Oil production hit a peak of 1.6 million bpd in 1995 as Indonesia benefited from the so-called oil bonanza era. That was after Chevron Pacific Indonesia, the country’s biggest oil producer, implemented an enhanced oil recovery plan, known as fracking, at its aging fields in Sumatra. Production has since been declining.

Reserves at many of Indonesia’s oil fields are declining and aging equipment and machinery make it less efficient to extract crude oil from these areas.

Priagung Rakhmanto, an energy analyst from the Reforminer Insititute, said that low investment and a lack of incentives were to blame for the decline in oil production.