Oil & Gas Indonesia: High Hopes for the Banyu Urip Field
Indonesian Energy and Mineral Resources Minister Ignatius Jonan hopes to see oil production at the Banyu Urip Field, part of the Cepu Block in East Java, rise to 300,000 barrels per day (bpd), a development that would also trigger the multiplier effect for the region, he added. The Banyu Urip Field is the key oil field in Indonesia as it accounts for about 25 percent of Indonesia's total crude oil output.
Based on data from Indonesia's Upstream Oil and Gas Regulatory Special Task Force (SKK Migas) Southeast Asia's largest economy produced 808,000 barrels of oil per day by the end of June 2017. The Banyu Urip field contributed 199,800 bpd to this total.
Through ExxonMobil Cepu Ltd, the Banyu Urip field is operated by American multinational oil and gas giant Exxon Mobil Corporation and Indonesia's state-owned energy firm Pertamina. The Banyu Urip field contains an estimated 450 million barrels of oil and therefore is the largest existing oil field in Indonesia.
Besides the importance of rising oil output for the government's budget (although Indonesia is a net oil importer, it still continues to generate significant foreign exchange earnings through crude oil exports), Jonan added that rising output at the Banyu Urip field will benefit the local society as it will provide more employment opportunities and encourages community development.
Jonan met ExxonMobil Senior Vice President Mark W. Albers last week. The meeting took place at the ExxonMobil Campus and Technology Center in Texas (United States). Talks between both sides included business opportunities in the downstream sector. Jonan also hopes to see ExxonMobile investing in the development of a network of public fueling stations.
Indonesia's Challenging Oil Sector
Indonesia's oil output has basically been in a state of decline over the past 20 years due to maturing oil fields in combination with declining appetite for oil exploration. The latter is usually attributed to Indonesia's weak government management, bureaucracy, the unclear regulatory framework and legal uncertainty. Moreover, the low oil price has also made it unattractive for companies to invest in costly exploration in Indonesia. Oil exploration is a risky undertaking: between 2002 and 2016 nearly USD $4 billion was spent - in vain - by oil and gas companies in the exploration stage in Indonesia without finding reserves suitable for commercial exploitation.
Read more: Oil & Gas Sector Indonesia: What Explains Weak Oil & Gas Exploration?
Indonesia now has to work hard to keep national oil production above 800,000 bpd (which is half the figure that was seen during Indonesia's oil peak in the mid-1990s). Meanwhile, the Indonesian population consumes 1.63 million bpd, implying about half of domestic demand needs to be imported from abroad.
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