Increase in oil prices feared to cause a drag on Indonesian economic development in 2008
The prices of crude oil have been on the increase lately triggered by a number of factors including Middle East conflicts notably in Iraq and mounting tension between Iran and the West over nuclear issue, and the falling value of the U.S. dollar against euro and other major currencies.
Prediction of an increase of world's oil consumption also contribute to the pushing up the prices. The IEA predicted the world's consumption of crude oil in 2008 will rise 2.3 million barrels a day. An increase in the prices of crude oil may cause a decline in Indonesia's economic growth in 2008.
Inflation will likely increase weakening the purchasing power of the people and falling purchasing power will cause a decline in consumption, which has been a major driving motor for the country's economic growth in the past several years. The cash strapped government may be forced to raise the oil fuel prices further worsen the condition.
Government encourages increase in oil production in 2008
The government has continued to encourage efforts to increase the country's oil production. Chevron is expected to increase its crude oil production from its oilfields in Sumatra by 10,000 bph. Pertamina EP also hopes to see a 28% increase in its oil production this year. BP reported a 50% increase in output from its offshore oil field in the Java Sea and ConocoPhillips raised output by 250% from its Belanak oil field.
Late October, a number of oil and gas contractors signed contracts valued at US$ 8 billion Meanwhile, the government offered 26 more oil blocks which are expected to bring in US$ 445 million in new investment.
Indonesia ranked among 23 largest oil producers in the world in 2006. Intensive exploitations involving multinational companies have rapidly reduced known oil reserves. In 2006, Indonesia's oil production totaled 1,061,000 bbl/day with a reserve of 4.4 billion barrels. The country's production was larger than that of Qatar which had a reserve of four times larger.
Crude oil and condensate production shrinking
The country's production of crude oil and condensate has continued to decline since 1997 - from 543,753,000 barrels consisting of 484,341,000 barrels of crude oil and 59,412,000 barrels of condensate to 534,892,000 barrels in 1998 and to 366,825,000 barrels in 2006 consisting of 322,295,000 barresl of crude oil and 44,895,000 barrels of condensate.
Indonesia's production of crude oil in 2006 was dominated by production sharing contractors (PSC), PSCs produced 324,733,263 barrels in 2006 including 215,600,709 barrels from onshore and the rest from offshore.
Pertamina (onshore) was the second largest producer of crude oil in Indonesia in 2006 with production of 18,905,887 barrels or 51,797 barrels per day.
Chevron Pacific Indonesia (CPI) largest producer
Chevron Pacific Indonesia is the country's largest producer of crude oil with production totaling 162,160,749 barrels in 2006 or almost 50% of the country's total production in the same year. Production of Pertamina in 2006 totaled 42,315,938 barrels, followed by ConocoPhillips with production of 23,380,513 barrels. ................................
INDONESIAN COMMERCIAL NEWSLETTER
FOCUS: IMPACT OF SOARING OIL PRICES ON INDONESIAN ECONOMY 1
INDUSTRY PROFILE: PETROLEUM INDUSTRY IN INDONESIA 5
Current issue 5
Government encourages increase in oil production in 2008 5
Development of World's oil industry 7
Riau dominates oil production in Indonesia 9
Crude oil and condensate production shrinking 12
Production of crude oil and condensate 2006 12
Chevron Pacific Indonesia (CPI) largest producer 13
Imports of crude oil rising 14
Imports by country of origin 15
Exports of crude oil declining 15
Japan the largest buyer crude oil from Indonesia 16
Major oil producer in Indonesia 16
Price of crude oil 25
Price of crude oil in 2007 leapfrogging 25
Government offers oil and gas blocks to investors 26
Mergers and acquisitions 27
Prospects and conclusion 28
OIL REFINING INDUSTRY 29
Current issue 29
Characteristics of products 29
Refines and production capacity 30
Cilacap and Balikpapan refineries the largest 35
New investment 35
Tuban refinery project 37
Exports down 34
Imports fluctuate 38
Price of BBM for industry up 39
Transport sector the largest consumer 40
Conclusion and prospects 40
MEDCO GROUP 41
PT. PERTAMINA 50
TRADE: MARKETING AND DISTRIBUTION OF OBF IN INDONESIA 55
Types of OBF commodities 55
OBF market still dominated by Pertamina 57
Pertamina's storage facilities 62
Flow of OBF from refinery or importing Port to different Destinations 63
Marketing units 66
Commercial distribution area (WDN) 66
OBF prices 67
Prospects and conclusion 70
INDUSTRY: IMPORTED BRANDS A THREAT TO PERTAMINA'S DOMINATION OF LUBRICANT MARKET 71
Current issue 71
Producers of lubricant in Indonesia 72
Pertamina's products dominate market 73
Main players in lubricant market 73
Promotion key to success in competition 74
CORPORATE NEWS IN BRIEF:
KS seeks alliance with four world's major steel makers 75
Pertamina wins an oil contract in Qatar 75
Straits Asia acquires two coal mining companies in Indonesia 75
Reykjavik to invest US$ 2 billion in geothermal power project 75
Major banks offer loan for food giant 76
Antam to team up with Tsingshan to develop nicjkel mines in OBI 76
ECONOMIC NEWS IN BRIEF:
LNG export contract with Japan to be reviewed 77
United States imposes anti dumping duty on Indonesian paper 77
Fish exports to China continue despite boycott 77
Only 25 ports open for ocan going ships 77
38 foreign garment makers to move operation to Indonesia 78
Increase in DMO proposed on natural gas 78
Anti dumping duties may be imposed on steel imports from five countries 78