Cut back: in spending expected in Indonesia
Indonesia sees 15% slash in E&P spend
Indonesia expects spending by contractors on oil exploration in the country to fall to $2.3 billion next year, down about 15% from an estimated $2.7 billion in 2009, the country's oil watchdog said today.
Crude oil production, which was about 1.5 million barrels per day in the 1990s, has nearly halved and Southeast Asia's biggest economy has become a net importer of crude oil in recent years.
Indonesia produced 949,100 bpd of crude oil and condensate in 2009, missing a target of 960,000 bpd, oil watchdog BPMigas said.
"Exploration spending is expected to be lower next year because many investors are reluctant to invest due to uncertainty over the cost recovery issue," said Sulistya Hastuti, a spokesman for BPMigas.
Indonesia has a scheme to reimburse oil companies for the cost of investing in exploration and production, but the country's parliament has been seeking to revise the scheme.
"If they cap the cost then the investors will be reluctant to invest and in the end it will impact on production," Hastuti said.
Another BPMigas official said Indonesia's oil production missed its target this year also because of technical problems at oil wells and ageing fields.
Major global resource companies such as Chevron, ConocoPhillips and Total operate in Indonesia, but the country has struggled to attract fresh investment and to develop new fields,
Many of the existing fields are ageing and suffering from diminishing output.
An energy ministry official, who declined to be quoted by name, said previously a target of producting 965,000 bpd of crude and condensate next year would be very difficult to achieve since output from older wells was falling about 10% to 15% per year.
Indonesia has offered new exploration rights and has said it will provide new incentives to oil and gas investors, including more favourable tax treatment and a better production split, in order to encourage exploration.
But industry insiders have said the incentives are not sufficient, particularly since many of the unexplored fields are in remote locations and often in deeper waters.
