The Jangkrik (cricket) Field in the Makassar Strait may become a game changer in the country’s oil and gas production, as the newly producing gas block is expected to rapidly increase production to meet the nation’s lifting target next year.
The Energf and Mineral Resources Ministry has proposed to the House of Representatives that the ready-to-sell oil production, locally known as lifting, in the 2018 state budget should hover between 771,000 and 815,000 barrels of oil per day (bopd).
Meanwhile, the gas lifting target was proposed to be from 1.19 million to 1.23 million barrels of oil equivalent per day (boepd), an increase from this year’s target of 1.15 million boepd.
Minister Ignasius Jonan said the Jangkrik Field, which is operated by Italian oil and gas giant Eni and started production in May at a rate of 120 million to 130 million standard cubic feet per day (mmscfd), would be able to reach peak production of 450 mmscfd next year.
“We are optimistic that production can rise because of the field currently being operated by Eni. We are optimistic that this will help increase the total oil and gas lifting,” he said in Jakarta on Wednesday.
The ministry also has its fingers crossed that the oil lifting rate will remain stable as the country would rely on major oil producing fields in the Rokan, Cepu and Mahakam blocks. The Cepu block in East Java, with its main field called Banyu Urip, is the backbone of the national oil output, which had a peak production rate of 185,000 bopd.
Official data shows that oil lifting this year had reached 788 bopd by May 97 percent of this year’s target, while gas lifting has fared slightly better at 98 percent of this year’s 1.15 million boepd target. Oil production has fallen a long way since its heyday in the 1970s when production reached a peak of 1.7 million bopd.
A recent report by BMI Research, a unit of the Fitch Group, forecasts that oil production in Asia is expected to be in terminal decline and will lose about half a million barrels of output over the next five years. BMI Research identified China, Indonesia and Malaysia as those countries that will suffer the worst from the decline.
Indonesia’s declining production is highlighted by the skyrocketing domestic demand for refined fuels, prompting more imports, which are expected to rise to 1.2 million bopd in 2026 from 812,000 bopd this year.
While aging wells and a lack of new oil and gas discoveries have been identified as the causes of this downfall, the snail’s pace rise of global oil prices since their crash two years ago has yet to convince investors to conduct more exploration activities.
West Texas Intermediate crude was traded at US$46.01 per barrel on Wednesday a 4 percent year-on-year (yoy) fall from the same period last year. Meanwhile, fellow benchmark Brent crude traded at $48.12, a 2 percent yoy drop.
The numbers are a far cry from optimistic expectations that prices could reach the $60 level this year and they have not been helped by the revelation that production by the Organization of Petroleum Exporting Countries (OPEC) rose despite its pledge to cut output.
OPEC and non-member exporters such as Russia had previously agreed to cut production by 1.8 million bopd and to not increase output until the end of 2018. However, a recent report revealed that its output rose by 336,000 bopd in May to 32.14 million bopd because of the production of members that were exempted from the cuts.
Even so, the Indonesian government remains optimistic that oil prices will eventually rise and it has proposed to raise next year’s ICP price to between $45 and $50 per barrel, up from the $45 per barrel in this year’s state budget. ReforMiner Institute researcher Pri Agung Rakhmanto said that the govemment and the House should focus less on the production and lifting rates and move their focus toward the amoiuit of oil and gas reserves available in the country
“Without any new discoveries, the lifting rate will remain around the same every year and it would be moot to discuss it every year. This is why it is more important to discuss how much more or less we have in reserve ‘every year,” he said
By measuring the amount of reserves available in Indonesia, Pri Agung said, the state could judge whether investors were still interested in conducting upstream exploration activities in the country.
Upstream oil and gas investment has continued to decrease, last year dropping by 24.5 percent to $12.01 billion from $15.9 billion in 2015.
Based on the current conditions, many believe that Indonesia’s oil reserves will be depleted in little over a decade if it keeps its lifting rate above 800,000 bopd without any new discoveries.
Data from the Upstream Oil and Gas Regulatory Special Task Force (SKK Migas) shows that Indonesian proven oil reserves dropped to 3,306 million stock tank barrels (mmstb) at the end of last year from 3,602 mmstb in 2015.
Jakarta Post, Page-13, Thursday, June 15, 2017
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