Oil Output to Fall Short of Target

The Jakarta Globe | Aug 07, 2014

Jakarta. Aging oil fields and an unexpected snag in the development of East Java’s Ketapang block mean Indonesia will miss its oil output target as set in the 2014 state budget, according to oil and gas upstream regulator SKKMigas.

That may, in turn, hurt state revenue, which has been under pressure due to a slump in commodity prices. “Average oil output by the end of the year may reach just 98 percent of the targeted 818,000 barrels of oil per day,” said Muliawam, a director for operations at SKKMigas on Thursday.

Output for the first six months this year averaged 797,000 barrels per day, Muliawan said. Every 10,000 barrel shortfall causes the state budget deficit to widen by around Rp 1.9 trillion ($161 million), according to Finance Ministry calculations.

The state budget contains an assumption that the deficit will be reduced to Rp 242 trillion this year, or 2.4 percent of gross domestic product. The budget also contains a target of $29.7 billion in oil and gas revenue this year, a revision from earlier estimates of $30 billion.

Muliawan said the development of the Ketapang block’s Bukit Tua field was delayed after the operator was forced to move its platform due to geographical circumstances.

“The field will go on steam in March next year,” said Muliawan, adding that the initial schedule was for November.

Muliawan said that the field was expected to boost Indonesia’s oil output by 20,000 barrels per day.

Output in the second half of the year depends heavily on the Cepu block in East Java, which is operated by ExxonMobil Indonesia. Muliawan said output from Cepu will reach 80,000 bpd by the end of the year before it reaches its peak of 165,000 bpd in the second half of 2015.

The country is also trying to arrest a natural decline at aging oil fields.

“We will get another 10,000 barrels per day from Pertamina’s enhanced oil recovery [EOR] projects next year,” Muliawan said.

EOR is a method of extending dwindling resources by injecting water and chemicals into oil-bearing rock formations.

Adriansyah, president director of Pertamina EP, one of Pertamina’s usptream subsidiaries, said that the company may also miss its 128,000-bpd output target for this year. Adriansyah said that the company he helms, one of the largest oil producers in the country, may only reach 124,000 bpd this year.

Adriansyah explained that Pertamina EP had seen delays in its flagship Sangasanga project in East Kalimantan, which he blamed on disruption from coal mining. “Mining activities hurt the land. Because of that, we need to flatten the land first which costs us time,” he said.

Adriansyah revealed plans to scale back EOR projects next year. “Currently, we have around eight to 10 EOR projects. This has led us to lose focus. In 2015, we will focus on only two EOR projects, in Rantau and Jirak fields in South Sumatra,” he added.

Pertamina’s lack of expertise in managing EOR projects has previously been cited as an argument against handing the state-owned company the Mahakam block, which is currently managed by French company Total under a contract due to expire in 2017.

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