Indonesia beats oil revenue target despite output shortfall

Thu Jan 10, 2013 7:33am EST

* Strong oil prices help exceed budget figures

* Govt expects oil output to recover to 900,000 bpd in 2013

By Fergus Jensen

JAKARTA, Jan 10 (Reuters) - Indonesia's revenue from its struggling oil sector is expected to have surpassed the government's target by 8 percent at $36 billion in 2012, despite production dropping 70,000 barrels per day (bpd) below expectations, government data shows.

Indonesia, a net importer of oil, has often fallen short of its oil production targets, with crude and condensate output declining at an annual rate of 3.8 percent between 1998 and 2011.

The 2012 revenue windfall comes as a combination of the rupiah's strength and average oil selling prices exceeded budget figures. The average Indonesia Crude Price (ICP) reached $112.73 per barrel in 2012 compared to the budgeted figure of $105.

However, at 860,000 bpd, 2012 oil production was around 7.5 percent below the target of 930,000 bpd, partly a result of a ruptured pipeline in the Duri field, a statement from oil and gas regulator SKMIGAS said.

"I never expected them to hit their target this year," HS Yen, an analyst at oil consultancy FGE told Reuters.

"Duri and Minas are matured fields and their pace of decline has to be offset by new fields," Yen said, referring to the archipelago's top two oilfields on Sumatra Island and the country's failure to attract new investment in the sector.

"The only new field is Cepu but its peak production has been delayed twice from 2011," Yen said, adding Cepu was currently producing 40,000 bpd and may reach peak production of 165,000-175,000 bpd next year.

Production at the Minas field operated by Chevron Pacific Indonesia, a subsidiary of U.S. oil giant Chevron corp., is declining, despite enhanced recovery (EOR) techniques in use there.

"They may have actually gained revenue last year because the ICP was higher," Yen said.

The average Indonesia Crude Price (ICP) for Minas for 2012 was $115.59/bbl.

Despite the decline, the government hopes to see oil production recover to 900,000 bpd in 2013.

Commenting the value of newly signed production-sharing contracts for 2013, SKMIGAS chief Jero Wacik said: "At US$ 26.2 billion, it's above the US$ 21.88 billion of investment commitments in 2012."

"Seeing the enthusiasm of the production-sharing contract holders, you can see that the oil and gas industry is improving this year. While 2013 will be a political year, the economy still needs to move ... it cannot stop because of politics."

Indonesia holds presidential elections next year and management of its resources is a key issue for candidates in the lead up to the polls.

"We are converting to gas and reducing our use of oil, primarily subsidized fuels, so our country will be safe," Wacik said.

A presidential regulation is expected to be announced this month to formalise the roles of the newly formed regulator.