RI oil sales fall short due to weather, refinery shutdowns

Indonesia’s crude oil sales in the first half of the year fell short of targets due to the impact of bad weather on commodity shipments coupled by disruptions at state oil and gas firm PT Pertamina’s refineries.

Upstream oil and gas regulator BPMigas said crude oil sales, also known as oil lifting, reached an average of 935,292 barrels of oil per day (bpd) while production for the six-month period stood at 959,823 bpd. The target for both categories in the 2010 state budget is set at 965,000 bpd each.

“The lifting realization was lower than production because of bad weather. This was not only the rain, but also storms that made shipping difficult,” BPMigas chairman R. Priyono said Tuesday.

In the first half of the year, weather in Indonesia was affected by the La Niña climate phenomenon under way in the Pacific Ocean. La Niña is a periodic cooling of the tropical Pacific sea surface that results in reduced rainfall in some parts of the globe but tends to produce above-average rains over Indonesia.

Priyono said the lower-than-expected oil lifting realization was also caused by problems at several Pertamina refineries that resulted in constraints on demand for crude oil.

BPMigas reported 122 cases of unplanned operation shutdowns in the first half of this year. The incidents have led to as much as 6,860 bpd in lost production. In 2009, there were 235 unplanned shutdowns, costing the country 21,150 bpd.

BPMigas said it believed the number of unplanned shutdowns would decrease this year.

“Last year oil and gas contractors did not really pay attention on maintenance as they were still unclear about the cost recovery payment. But now the government has said the payment would not be capped, creating certainty for the contractors,” Priyono said.

He added that the low oil lifting realization had resulted in an escalation in the volume of crude stock.

“Our oil stock is currently at 11.3 million barrels,” he said. BPMigas said earlier it may release the stock to meet state budget targets, but did not specify when and how much of the stock would be sold.

Contrary to common perceptions, Priyono said, the state budget actually benefitted from the lower lifting realization in the first half as the average oil price was lower than targeted.

“The Indonesian crude price [ICP] was US$73.75 per barrel for the whole first half, while the state budget assumed the ICP at $80 per barrel,” Priyono said.

Oil and gas has been the backbone of Indonesia’s state budget, contributing around 30 percent to total government revenue.

In 2009, the sector contributed $19.95 billion to the state budget. As of the first half of 2010, the sector’s contribution had reached $12.05 billion.

BPMigas reported that it had approved development plans for 15 upstream oil and gas projects in the first half of the year, including ConocoPhillips’ development plan for the corridor block phase two project in South Sumatra and Total Indonesie’s development plan for the Tunu phase 2 project.

BPMigas also reported that Korean National Oil Corporation (KNOC) had returned three oil and gas blocks to the government as exploration activities found no economical reserves in the blocks. The three blocks are the Wokam Block, the North East Madura Block I and the North East Madura Block II. KNOC spent around $120 million on the exploration.