Domestic spending on upstream oil, gas may reach Rp 50t

Domestic firms are likely to benefit increasingly from the expenditure of oil and gas contractors this year as the government moves aggressively in promoting the use of local products and services, upstream regulator BP Migas says.

BP Migas chairman R. Priyono told reporters Friday that domestic firms might now be able to absorb as much as Rp 50 trillion (US$5 billion) from the annual spending of oil and gas contractors which was now estimated to range between Rp 110 trillion and Rp 150 trillion per year.

This expected level of domestic spending, Priyono said, was not optimal but was significantly higher than that of previous years when most contractors spent only 20 percent of their annual spending  domestically through local firms, while most of their expenditure has been going abroad to pay for foreign goods and services.

“We don’t set high targets as we have just begun intensifying the use of local content in the industry. Thus, we will be very happy with the Rp 50 trillion if it can be realized,” Priyono said.

BP Migas is hopeful that by the end of 2010 at least 55 percent of its total expenditure in the upstream oil and gas sector will go to domestic suppliers. The local expenditure proportion is expected to increase much more after that, up to as much as 91 percent by 2025