are we there yet?, page-39

happy new year,something to read about the difficult process before drilling...,Upstream oil and gas regulator SKKMigas estimated that the sector’s capital expenditure will rise by 32 percent in 2014 as it seeks to boost oil and gas production.

The regulator’s interim chief, Johannes Widjonarko, said that based on the work and budgetary program submitted to SKKMigas, oil and gas companies planned to spend at least $25.6 billion next year.

This year’s spending is projected to reach $19.3 billion by the end of the year.

Around $14.9 billion, or 77.2 percent of the total expenditure next year, will go to production activities. Spending for exploration activities is projected to take another $3.84 billion.

The $25.6 billion spending allotted for 2014 is expected to generate a state revenue of up to $30.6 billion from 870,000 barrels of oil per day and 7.175 billion British thermal units (bbtu) of natural gas per day.

Next year’s projected revenue for the upstream sector is lower than this year’s projection of $31.3 billion.

Johannes said that the figures submitted by companies in their work and budgetary program were different than those set by the government in the state budget.

According to the work program, oil output is expected to reach 804,000 barrels per day, while gas production was estimated to reach 6.8 bbtu per day, Johannes said.

The approved state budget set a target of oil production at 870,000 bpd and gas output at 7.1 bbtud.

Johannes said the discrepancy was caused by the time gap that occurred between the time lawmakers approved the state budget and the time companies submitted the work program.

“The state budget was approved in October while SKKMigas processed the work program in December.”

Still, Johannes said that oil output can be increased by around 25,000 barrels per day to 830,000 bpd next year with measures that can be taken by the regulator.

There will be more natural gas allotted for domestic consumption next year, Johannes added.

Around 54.2 percent of the natural gas output, or 4.56 bbtu, had been allotted for domestic consumption next year, a slight increase from a domestic allocation of 52.1 percent this year.

When it comes to increasing oil output, Indonesia does not have much options.

“There are no significant discoveries, so when we talk about increasing output, it means we are extracting more from aging reservoirs,” Johannes said.

Still, he added that the regulator will push companies to boost their commitment to perform exploration activities. “There are 329 working areas in Indonesia, of which only 72 are already in production stages while the remainder is still in exploration stages.”

This year’s revised work and budgetary program detailed that companies planned to drill 121 exploration wells, but only managed 91 wells.

Johannes said the regulator acknowledged the difficulties companies face in performing exploration activities, which include land acquisition issues, lack of equipment and delays in procurement.

Therefore, the government and regulator had trimmed the number of permits in the upstream oil and gas sector from 284 to only 64 permits.
Perusahaan Gas Negara employees check pipes at a gas receiving-and-transmitting station in Bojonegara, Banten province. More than half of the expected capital expenditure in the upstream sector for next year is expected to go toward production.