SKK Migas targets upstream investment to increase 32% to $25.64b this year

Investment in the country?s upstream oil and gas sector in 2014 is targeted to increase by 32 percent to US$25.64 billion from $19.34 billion last year, according to J. Widjonarko, Acting Chairman of the upstream oil and gas authority SKK Migas.

The investment target is based on the discussions of the 2014 work program and budget between SKK Migas and oil and gas contractors, SKK Migas said in a statement issued Wednesday.

The planned new upstream investments include $3.84 billion for exploration activities, $1.6 billion for administration, $5.3 billion for development, $14.9 billion for production activities, the regulatory body said.

Planned activities for 2014 include 9,020 km 2D seismic, 11,633 km2 3D seismic, drilling of 205 exploration wells, development of 1,364 wells, work over of 932 wells, and well services covering 33,060 wells.

SKK Migas said that there has been rising trend in upstream investment in recent years from $11.03 billion in 2010 to $13.99 billion in 2011, and further rose to $16.54 billion in the following year.

?SKK Migas has been pushing for new investment particularly in exploration activities and finding new reserves,? said Widjonarko.

The 2014 state budget has set an oil lifting target of 870,000 bpd, and gas lifting of 7,175 bbtud. This is equal to 2,110,000 boepd. Meanwhile state revenue from oil and gas sales is projected at $30.6 billion.

SKK Migas said that the oil and gas production target set by the government is higher than the target set in the 2014 WP&B of the oil and gas contractors, which set a target of 804,000 bpd for oil and 6,853 bbtud of gas. ?The production target gap is a challenge for the oil and gas industry in 2014,? Widjonarko said.

SKK Migas said it has prepared a number of measures to help deal with the gap problem. The first is resolving the obstacle to oil and gas operations including reducing failures in production operation and drilling to obtain additional output, and facilitate project related problems.

The second is to reduce the number of unplanned shutdown by among others evaluating the details of planned production facilities maintenance and intensifying the supervision of production facilities.

The third is to overcome the sharp production rate decline by ensuring timely well drilling schedule and optimization of development process. The fourth is to deal with problems related to land acquisition and licensing. SKK Migas said it would be directly involved in land acquisition process.

?If those measures can be implemented properly, plus efforts by the contractors to optimize oil production in a number of fields, hopefully oil production can be in the range of 830-840,000 bpd,? Widjonarko said.

Editing by Reiner Simanjuntak