No Pain, No Gain; Will Indonesia's Oil Production Be Back on Track?
This year, Indonesia will have to face declining production numbers in its oil and gas sector. Gas output is assumed to decline by 14.77 percent compared to last year, while oil output will reach similar levels as in 2012, provided that there are no disruptions due to bad weather and leakages (a prerequisite that will be hard to meet).
Once a major oil producing country and member of the OPEC, Indonesia's oil production numbers have been falling by three to five percent annually in the last decade, turning the country into a net importer and made it decide to leave the OPEC voluntarily.
Last year, Indonesia produced 861,000 barrels of oil per day (bpd), failing to meet the government target of 930,000 bpd. This year, it seems highly unlikely again that the government target (lowered to 900,000 bpd) will be met as current oil fields are maturing. Some major oil producers that operate in Indonesia, such as Chevron Pacific Indonesia and Pertamina, have lowered targets for 2013. According to temporary state oil and gas regulator SKK Migas, a realistic target for this year's oil output is around 840,000 bpd.
In 2013, 22 new oilfields will start production in Indonesia. But production of these new fields will only make up for the decline in production of current fields, and - as such - will not boost Indonesia's oil output; it merely reduces the decline.
Rudi Rubiandini - director of SKK Migas - has high hopes, however, for the Cepu block in East Java, operated by ExxonMobil. Barring any unforeseen circumstances, the Cepu block will start production in late 2014 and will have a daily production of around 165,000 barrels. Rubiandini therefore estimates that Indonesia can deliver one million bpd between 2015 to 2017. After 2017, Indonesian oil production still faces uncertainty as there has been a lack of successful oil exploration projects.
| 2011 | 2012 | 2013¹ | 2014¹ | 2015¹ | |
| Oil Production (bpd) |
902,000 | 861,000 | 840,000 | 900,000 | 1,000,000 |
¹ indicates forecast
Likewise, Indonesia's gas production is also set to decline in 2013. SKK Migas expects gas output to decline by 14.77 percent this year compared to 2012 due to maturing gas fields. Major gas producers such as Total EP Indonesia and Vico Indonesia have lowered their forecasts for this year. Despite the production decrease, allocations for domestic use - instead of exports - will rise by 11.3 percent.
Reduced production numbers from the oil and gas sector implies a serious impact on Indonesia's balanced budget. The deficit of the state budget will rise to IDR 1.82 - 1.91 trillion, and more oil and gas imports will be needed to satisfy domestic demand. As the government subsidizes fuel prices to a large extent, the state budget will be burdened further.