Boston, MA -- (SBWIRE) -- 07/17/2012 -- BMI View: Oil and gas exports form one of the key pillars of the Indonesian economy although the outlook for the sector is becoming increasingly uncertain given dwindling oil reserves in the country's maturing fields. The government has recently put in place measures to incentivise oil companies to conduct deep-sea exploration in a bid to increase total reserves. Greater domestic consumption leading to higher imports and lesser exports will be a key trend in the years to come.
The main trends and developments we highlight for Indonesia's Oil and Gas sector are:
- We have revised up our 2016 crude oil and gas liquids production forecast from 916,000 barrels per day (b/d) to 927,800b/d due to increased production from ExxonMobil's Cepu field, which is to reach peak production of 165,000b/d by late 2014. The country will remain a net importer of oil - with 2016 consumption forecast at 1.55mn b/d as domestic electricity demand in the country expands along with economic growth.
- Under current production sharing contracts (PSCs), the government takes 85% of oil production while the remaining 15% goes to the oil contractor. For deep-sea oil projects, the government is willing to decrease its stake to 65% in a bid to incentivise oil companies to conduct deep-sea oil exploration. Without the discovery of any major oil deposits, we expect the country's proven oil reserves to decline from 4,200mn barrels (bbl) in 2011 to 3,640mn bbl by 2021.
- Steps are being taken to cope with rapidly rising demand for fuel and electricity. The government has been considering scrapping fuel subsidies for private cars - starting on April 1 2012 in Greater Jakarta and later for other parts of Java and Bali.
- Natural gas production is expected to have hit a near-term peak of around 87.3bn cubic meters (bcm) in 2011. The country's gas consumption is on the rise and is forecast to reach 54.5bcm by 2016. We expect natural gas exports to decline substantially from 44.5bcm in 2011 to 31bcm by 2016.
- Production from Indonesia's East Natuna gas project is unlikely to start before 2022, and bringing the large-scale project onstream could cost up to US$40bn. The Natuna D-Alpha block is estimated to hold 1,300bcm of recoverable gas reserves, making it the largest single gas field in Asia.
- Domestic consumption is set to drive crude oil imports to US$22.5bn by 2016 from US$17.2bn in 2011. Natural gas exports will also be diverted domestically with exports set to decline from US$23.8bn in 2011 down to US$15.3bn in 2016.
- At the time of writing we assume an OPEC basket oil price for 2012 of US$111.47/bbl, falling to US$107.00/bbl in 2013. Global GDP in 2012 is forecast at 2.6%, down from an assumed 3.1% in 2011, reflecting a faltering recovery in the US and an uncertain eurozone debt situation. For 2013, growth is estimated at 3.3%.
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