Indonesian Oil Production In Rapid Decline

We can add Indonesia to the list of major oil fields in rapid decline.  The list is headed by Mexico’s giant Cantarell field and by the North Sea.  Apparently political mismanagement is a factor in Indonesia’s inability to attract foreign capital and expertise to try to find new reserves.

Indonesia warns oil output to finish in 10 years’ time

JAKARTA: Indonesia’s oil watchdog, BPMIGAS, warned on Friday that the country’s dwindling oil reserves could be exhausted in 10 years’ time if no new reserves are found.

Indonesia has struggled to develop its rich energy resources, turning into a net importer of crude oil in recent years.
Southeast Asia’s biggest economy said earlier this year that it would quit the Organization of the Petroleum Exporting Countries (OPEC) because as a net oil importer it is not happy with high global crude prices.

“The declining rate in production is between 8 to 10 percent per year. That means production will finish in 10 years’ time if we have not found new reserves,” Edi Purwanto, deputy chief of watchdog, BPMIGAS, told reporters.

“There are certain factors about the investment climate that make investors worry about investing in Indonesia,” he said.
Foreign investors in Indonesia’s resources sector often complain about the uncertain regulatory environment and lack of respect for contracts.

“There several issues, such as cost of production, nationalism issues, and a levy by regional governments” which deter investors, Purwanto added.

Purwanto said that there had been little response from investors when the government offered 26 oil blocks for exploration last October. The government has signed only four contracts so far for the blocks offered. reuters

Posted in Categories: Commodities, Contributor, External Research.

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Comment by thku4grace

2008-08-04 23:27:31

I love to read these stories about these countries that have a history rewriting contracts and nationalize industries that outsiders risked their own capital to develop. I’m pretty confident those 4 contracts are all Chinese. The Chinese are often the last source available. I think the Chinese go where others won’t because first they’re more desperate for energy resources than others and other countries are afraid to cheat them because no one will rescue them from an angry Chinese government. I read Venezuela is upset because they can’t draw foreign capital into their country anymore. In the same article it mentioned that El Salvador was drawing in more foreign capital than Venezuela, and El Salvador has no precious natural resources at all.

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