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Indonesian production forecast to slide this year
With not enough new oil and gas projects come onstream to counter declines at mature fields, national oil and gas production will likely slide this year
COMMENTARY
WHAT:
Rystad Energy said has said Indonesian oil production will likely slide to 718,000 bpd in 2020.
WHY:
The analysis firm projects only one new oil project will come online this year.
WHAT NEXT:
New upstream laws will fail to reverse production declines in the short term.
INDONESIA’S struggle to attract investment in new exploration projects has been evident for years. The country’s oil and gas production are in decline, with what few finds that have been made failing to offset output declines at older fields.
Upstream regulator SKK Migas warned at the start of the year that national oil production might only reach 705,000 barrels per day, short of the government’s target of 755,000 bpd. Crude output amounted to 746,000 bpd in 2019, down from 772,000 bpd produced in 2018 and 801,400 bpd in 2017.
SKK Migas’ prediction is one increasingly shared by analysts, who have warning that a lack of major new discoveries is likely to send crude output lower this year.
Hard numbers
Energy consultancy Rystad Energy said on February 20 that Indonesian oil and gas pro- duction was likely fall this year despite the central government’s projection that com- bined oil and gas production would expand by 8% year on year.
Rystad said that rather than the 1.2% year on year growth required to meet SKK Migas’ oil production target, the country’s oilfields were more likely to deliver 718,000 bpd in 2020.
The consultancy predicted that production from mature assets would decline by about 38,000 bpd this year, while assets in the ramp-up phase would add 10,000 bpd. This would leave a 37,000 bpd gap between actual production and SKK Migas’ target.
Rystad’s senior upstream analyst, Prateek Pandey, said that of the eight fields set to start up in 2020, there was only one oil play – the Malacca Strait Phase 1. He said: “Because of this and the delays to projects that were set to start producing in 2019, even maintaining 2019 levels of oil production might be difficult – let alone meeting the growth targets set by SKK Migas.”
Rystad also expressed some scepticism that the country’s developers could boost natural gas production by the 12.4% necessary to meet SKK Migas’ forecast of 6.67bn cubic feet (188.89mn cubic metres) per day. Rather, the consultancy said, production was likely to fall to 5.87 bcf (166.24 mcm) in 2020 from 5.93 bcf (167.94 mcm) in 2019.
Wood Mackenzie shares Rystad’s downbeat outlook for Indonesian oil and gas production, with research director for upstream oil and gas in Asia Pacific Andrew Harwood telling Reuters: “We are forecasting a 6% decline in liquids, and a 2% drop in gas output for 2020.”
What next
Jakarta is reviewing whether to allow contrac- tors to choose between the current gross-split licensing model and the previous cost recovery production-sharing contracts (PSCs).
Developers could be allowed to opt for the older system as long as their proposed costs were considered to be fair and showed a com- mitment to increasing production. The govern- ment is also looking to streamline the upstream
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w w w . N E W S B A S E . c o m Week 08 26•February•2020