Oil Sector Indonesia: Production Target 2016 and Rejoining the OPEC
Indonesia expects to produce between 800,000 and 830,000 barrels of oil per day (bpd) in 2016. This range was agreed during a working meeting between Commission VII (which oversees the country’s energy sector) of the House of Representatives (DPR) and the Energy and Mineral Resources Ministry. The meeting was held in the context of deliberations on the 2016 State Budget. So far this year, Indonesia’s crude oil output stands at an average of 802,046 bpd (monthly basis). Domestic demand, however, stands at 1.43 million bpd.
In 2014 Indonesia managed to produce 794,000 bpd. This was well below the government’s oil lifting target of 818,000 bpd set in the 2014 State Budget. Since its peak oil production in the mid-1990s during the Suharto regime (when Southeast Asia’s largest economy produced about 1.6 million bpd), the country’s oil production has been in decline due to various matters including weak government management, bureaucracy, an unclear regulatory framework, corruption and legal uncertainty. These factors all contributed to declining investment and exploration in the oil industry, leading to maturing oil fields.
Declining oil output in combination with sharply rising oil demand (particularly brought about by the government’s generous fuel subsidies which were only scrapped in January 2015) turned Indonesia into a net oil importer and thus it left the Organization of Petroleum Exporting Countries (OPEC) in 2008. Currently, Indonesia imports roughly 350,000 barrels of oil per day and 500,000 barrels of fuel per day from various countries in order to meet domestic demand.
Indonesia’s Crude Oil Production (in thousand bpd):
Starting from March 2015, however, Indonesia’s crude oil production has risen as the Bukit Tua oil field (part of the Ketapang block in East Java and which is operated by Petronas Carigali) has come online, while output at the Cepu Block (also located in East Java) increased and is expected to reach its peak production rate by September of October 2015. Last year, it was reported that this block has an estimated peak production level of 165,000 bpd.
Expected higher oil output is also a reason why Indonesia has gained enough confidence to rejoin the OPEC after a seven-year hiatus. Energy and Mineral Resources Minister Sudirman Said recently announced that the country will rejoin the OPEC in November 2015 after all the cartel’s members approved Indonesia’s application. Indonesia is eager to rejoin as this will strengthen its relationship with global oil suppliers. Despite being a net oil importer and having experienced declining oil output over the past two decades, Indonesia remains a significant oil and gas producer.
Indonesian Oil Production and Income:
| Production | State Income |
|
| 2015¹ | 825,000 bpd | |
| 2014 | 794,000 bpd | |
| 2013 | 826,000 bpd | USD $31.3 billion |
| 2012 | 860,000 bpd | USD $33.5 billion |
| 2011 | 900,000 bpd | USD $35.9 billion |
| 2010 | 945,000 bpd | USD $26.5 billion |
| 2009 | 949,000 bpd | USD $20.0 billion |
¹ government target
Source: Investor Daily