Upstream investment continues to dwindle
Friday, July 7 2017 - 02:47 AM WIB
Realized investment in the country?s upstream oil and gas sector continued to fall during the first six months of this year amid lingering weak oil price environment.
Chairman of the upstream oil and gas authority SKK Migas, Amien Sunaryadi said on Thursday that investment in the upstream sector in the January-June period of this year totaled only US$3.98 billion, or a nearly 30 percent drop compared to $5.65 billion in the corresponding period of last year. It is also much lower compared to $7.74 billion in the first-half of 2015.
Amien said that the first-half 2017 realized investment was still far below the full-year target of $13.8 billion. He expected investment to accelerate in the latter part of the year as was the case in the past, and as oil price environment improves.
Of the total $3.98 billion investment during the first-half of this year, $3.96 billion were spent for exploitation activities, and only $0.02 billion for exploration activities to find new reserves.
Oil and gas contractors in the country have also urged the government to further improve investment climate in the upstream sector amid the weak oil price environment including by providing incentives especially as the government plans to apply the gross split mechanism in new oil and gas contracts, replacing the current cost recovery mechanism. Under the gross split scheme, contractors can no longer get reimbursement for their expenses from the government in return for greater output split. Some contractors have said that the gross split scheme will make many upstream projects to be no longer economically feasible without tax incentives.
Elsewhere, SKK Migas said that average crude oil production in the first semester of this year stood at 808,800 bpd, slightly higher than the 808,400 bpd target set in the 2017 work program & budget (WP&B).
Gas production during the same period averaged at 7,512 mmscfd, lower than the 7,859 mmscfd target.
Meanwhile, average oil lifting reached 802,000 bpd, or 98 percent of the 815,000 bpd target set in the 2017 state budget. Gas lifting stood at 6,338 mmscfd, also 98 percent of the target in the state budget.
Editing by Reiner Simanjuntak