Wednesday, May 19, 2010

Indonesia Needs to Move Fast to Reach Oil Goal

Indonesia needs to offer at least 500 new oil blocks next year for exploration in order to meet its target of producing 1.5 million barrels of oil a day by 2015, head of upstream oil and gas regulator BPMigas Raden Priyono said on Wednesday.

The nation needs to open up new areas, both onshore and offshore, for exploration, he said. “The responsibility is now with the Energy Ministry.”

However, Evita Legowo, director general of oil and gas at the Energy Ministry, said offering that amount of new blocks, even over the next five-year period, was unlikely, calling into question how realistic the government’s 2015 target is.

“I don’t think it is possible,” she said. “If we could offer 50 new blocks in a year, it would be a good achievement for us.”

In 2008 and 2009 Indonesia offered just new oil and gas blocks, out of which only eight found takers, due to the financial crisis and uncertainty about the cost-recovery caps.

Oil production in Indonesia has declined markedly since the 1990s, when output last reached 1.5 million barrels a day. Indonesia has failed to produce a million bpd since 2007, when the country became a net importer of crude. Last year, Indonesia produced 949,100 barrels a day, missing its target of 960,000. This year, the target is 955,000 rising to one million in 2011.

However, even this year’s modest target is questionable. BPMigas had said 917,000 barrels was a realistic target for this year, but after apparent political pressure, it agreed on the 955,000 barrel target.

Evita acknowledged that Indonesia still had enormous untapped oil and gas potential but she said the 2015 target would be hard to achieve.

Karen Agustiawan, president director of state-owned oil and gas company PT Pertamina, said the most important thing for the government to do if it wanted to reach the target was to make it easier to get exploration permits.

“Even though we’re a state owned company, we do not get privileges in obtaining permits. We want a one door permit policy since currently it takes more time getting the permit than it does to do the seismic survey,” she said. Karen also called for a reduction of bureaucracy and political in volvement in the permitting process.

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