Lower cost recovery to undermine oil production target: SKK Migas

Upstream authority SKK Migas fears that oil production target of 820,000 bpd this year may not be achieved following a significant cut in the cost recovery budget.

SKK Migas Deputy M. Zikrullah was responding to a recent decision by the House of Representatives State Budget Committee to drastically cut down the budget allocation for oil and gas recovery this year to US$8 billion from the $11.9 billion as proposed by the upstream authority.

He feared that with the much smaller budget, oil and gas contractors would further cut down spending such as on well maintenance and work over programs, which have actually been reduced in the wake of the oil price drop. As such, this would lead to lower oil production, which in turn would also undermine the government?s revenue from the sector.

He added that the lower oil and gas recovery budget would also further discourage oil and gas contractors from carrying out exploration activities.

Zikrullah said that SKK Migas and oil and gas contractors are currently in the process of reviewing the firms respective 2016 Work and Budget Plan. (*)