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Indonesian upstream set for another tough year
The country’s upstream regulator has warned that national oil production is likely to fall significantly short of the government’s target for 2020
COMMENTARY
WHAT:
SKK Migas has said production might only reach 705,000 bpd, 50,000 bpd below target.
WHY:
The country lacks much- need mega discoveries to replace maturing fields.
WHAT NEXT:
Jakarta needs to
sell investors in the potential of the country’s unexplored acreages.
INDONESIA’S upstream regulator SKK Migas has warned that the country could miss its 2020 crude oil production target despite an antici- pated rise in upstream spending.
SKK Migas chairman Dwi Soetjipto told reporters on January 9 that production might only reach 705,000 bpd, short of the govern- ment’s target of 755,000 bpd. Soetjipto said the estimate was based on work programmes that had been submitted to the agency by the coun- try’s oil contractors. These same work commit- ments should see developers invest an estimated $13.8bn this year, SKK Migas said, up from $11.49bn in 2019.
Upstream struggle
Soetjipto said the lower-than-expected per- formance was the result of curtailments in some oilfields, unplanned shutdowns by 46 companies, pipe leaks and a forest fire in Riau Province that disrupted operations at the Rokan block, which is the country’s second largest oil producer.
Soetjipto said the regulator hoped state-owned Pertamina would be able to start drilling at Rokan this year, as it gears up to take control of the block from Chevron in 2021, and help narrow the gap between actual production and this year’s target. Pertamina’s upstream director,
Dharmawan Samsu, told reporters on Jan- uary 3 that the company wanted to drill at least 20 wells at Rokan this year and that the goal was to start work in the third quarter. Whether the company is able to fol- low through on these plans remains in ques- tion, however, given that Samsu also said in January 2019 that his company hoped to start drilling that year.
Moreover, Soetjipto told reporters on December 17 that the block’s transition could see production fall 15.27% year on year in 2020 to 161,000 bpd. Production in the first half of 2019 was almost 191,000 bpd.
SKK Migas is also waiting to see if Exxon- Mobil’s environmental impact assessment (EIA) for the planned expansion of the country’s larg- est oil producing block – Cepu, in East Java – is approved. Soetjipto said if it was approved then production would climb from 220,000 bpd at present to 235,000 bpd.
SKK Migas data show that the field produced 216,000 bpd of oil in the first half of 2019. In December, ExxonMobil brought onstream the block’s Kedung Keris field, which has an esti- mated 20mn barrels of oil reserves and a pro- duction capacity of 5,000 bpd.
Predictions of further declines in oil pro- duction underscores the importance of Jakarta’s announced reforms in early December.
90 80 70 60 50 40 30 20
2009 2010
2011 2012
Production
2013 2014 2015 2016 Consumption Exports
2017 2018
Data: BP
Indonesia's gas balance ™
Week 02 15•January•2020 w w w. N E W S B A S E . c o m P7
bcm per year