PETROLEUM REPORT INDONESIA 2005-2006

Executive Summary

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Table of Contents Petroleum Report Indonesia 2005-2005

Natural Gas

Reserves and Production

2000 – 2004

      2004

   Reserves                : 188.3 TCF
    Production              : 3,030 BCF
   Export revenue       : $8.1 billion

Indonesia has natural gas reserves of over 188.3 TCF – 97.7 TCF proven and 90.6 TSCF probable/possible.  Indonesia’s largest producers (in order) are Total, ExxonMobil, Pertamina, Vico, ConocoPhillips and BP, all of which operate under production sharing contracts and account for 90 percent of the country’s total production.

Indonesia, which traditionally exports gas in the form of LNG, started natural gas pipeline exports to Singapore in January 2001 and inaugurated the Sumatra-Singapore pipeline in late 2003.  Pipeline gas exports reached 129 BCF in 2004, valued at $8.1 billion.  The major uses for Indonesia’s natural gas are LNG and LPG production, followed by domestic power generation, and fertilizer and petrochemical production.

LNG and LPG

Indonesia remained the world’s leading exporter of LNG in 2005, with 18.8 percent of the world market. LNG production at Arun and Badak (Bontang) was 25.5 million metric tons (MT) in 2004, a decrease from the 2003 production level of 26.4 million MT. Japan, South Korea and Taiwan were the key markets for LNG.  Press reports indicated that Qatar overtook Indonesia as the top LNG exporter in April 2006.

LPG production declined slightly to 2.016 million MT in 2004 from 2.023 million MT in 2002, while exports to the four top customers -- Japan, Hong Kong, Taiwan and Australia -- dropped to 850,000 MT.

LNG and LPG Production 2000 - 2004

(in 1,000 tons)

Construction of the Tangguh LNG plant in Papua is underway following the GOI’s final approval in March 2005. Beyond the initial commitments from original buyers, the project secured an additional 1.35 million MT per year commitments in 2004 with South Korea’s POSCO and K Power.

As of March 2006, talks with Japanese buyers to extend 12 million MT worth of LNG contracts set to expire in 2010 are awaiting a GOI decision on its domestic gas policy. Tight production levels and high demand from fertilizer plants may cause the GOI and some PSCs to divert a portion of their LNG export cargoes to the domestic market.

Refining and Imports

Indonesia has an installed refining capacity of approximately 1.056 million b/d at nine state-run refineries.  Capacity utilization was 94.7 percent through the end of 2004.

Indonesia’s crude oil imports rose to 148.5 million barrels in 2004, largely from Saudi Arabia and Nigeria. Fuel product imports rose to 124.9 million barrels in 2004 from 106.4 in the previous year.

Growing domestic consumption combined with limited capacity at Indonesia’s nine refineries account for the increase in crude oil and fuel product imports. Domestic fuel consumption increased to 64.7 million kiloliters in 2004, about 4.8 million kiloliters higher than 2003. Pertamina has experienced difficulty in coping with the high level of recent demand.  Additionally, problems in arranging financing to cover fuel import purchases led to shortages of diesel fuel, kerosene and gasoline in mid 2005.

Petrochemicals

The petrochemical industry has yet to recapture its pre-Crisis dynamism.  No new plants were completed during the past two years, while the country’s import of petrochemical product increased. However, the resumption of the Tuban petrochemical project in 2004 signaled the stirrings of a slow recovery for the industry. Lack of gas also hindered fertilizer production and resulted in the suspension of production at Pupuk Iskandar Muda, PIM I and liquidation of the ASEAN Aceh Fertilizer plant (AAF) in 2005.

Regional Autonomy

On January 1, 2001, Regional Autonomy Law 22/1999 and Fiscal Decentralization Law 25/1999 came into effect. Law 25/1999 contains formulas for sharing revenue between the central government and various regional authorities.  On October 15, 2004, the GOI amended these laws with Regional Autonomy Law 32/2004 and Fiscal Decentralization Law 33/2004 to further clarify the roles of central and regional authorities. These new laws also changed the revenue sharing splits between the central government and regional authorities.  They also contained more detailed procedures for revenue sharing and regional autonomy implementation. Regulation 55/2005, issued on December 9, 2005, implemented the new laws.

Shares of state revenue* before and after Law No. 25/1999

* State revenue refers to net oil and gas profits after PSC share and cost recovery are deducted.  Special autonomy provisions for Aceh and Papua give those provinces 70 % of net oil and gas profits after PSC share and cost recovery, with the remaining 30% to the government.

A persistent problem has been the misunderstanding of the calculations of oil and gas revenues by sub-national government officials, which has led many regional administrations and their citizens to overestimate the value of future transfers.  To clarify the regions’ share of oil and gas revenues, the Ministry of Finance began the practice in 2005 to issue a yearly decree estimating the allocation of oil and gas revenues to the all of the provinces, regencies, and cities. 

Major Events in Indonesia

 
                                                                                                     
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