Indonesia seeks greater control over its energy resources

The Indonesian government, aiming to play a greater role in managing its energy resources, plans to step up the participation of domestic firms in developing the country's oil and gas industry.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 10 -- The Indonesian government, aiming to play a greater role in managing its own energy resources, plans to step up the participation of domestic firms in developing the country's oil and gas industry.

"The Indonesian government has the right to manage its energy resources, and President [Susilo Bambang] Yudhoyono agrees with it," said Vice-President Jusuf Kalla during a state visit to the Netherlands.

"No single country in the world allows foreign entities to manage its energy resources," Kalla said, citing the fact that most of his country's major energy projects are operated by international oil companies.

State-owned PT Pertamina produces 115,000-125,000 b/d of oil, Kalla said, while Chevron Corp. produces more than 400,000 b/d, or some 45% of the country's total oil output.

Kalla said that boosting the roles of domestic companies does not necessarily mean rejecting international oil companies as partners, especially as the country still needs their financing and internationally recognized expertise.

The vice-president, however, cited the expired contract of ExxonMobil to operate the Natuna D-Alpha Block as a chance for Indonesians to manage their own energy resources.

"I have said since the beginning that Exxon's contract automatically expired in 2005," said Kalla. "We have given them a chance to renegotiate the contract but they did not make use of it," he said. "So it is our chance to self-manage our energy resources."

Earlier this week, an Indonesian delegation led by Kalla to the Netherlands suggested that Royal Dutch Shell PLC could improve its chances of participating in the Natuna D-Alpha Block by transferring its oil refining operations to Indonesia from Singapore (OGJ Online, Feb. 10, 2009).

Kalla's statements coincided with government efforts to increase the country's oil production—mostly on the decline over the past 5 years largely due to aging fields and underinvestment in new ones.

Indonesia's oil production is targeted to reach 960,000 b/d of oil in 2009 based on some $13.15 billion of investment, according to upstream oil and gas regulator BPMigas.

It said about $12.95 billion of the planned investment would be spent on production activities: $3.73 billion for drilling activities in 1,237 wells, $2.85 billion for production facilities, $4.72 billion for operational production, and $1.64 billion on administration.

BPMigas said that only $201.57 million would be spent on new exploration.

Contact Eric Watkins at hippalus@yahoo.com.

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