T

he country'€™s oil production has stayed far below expectations in the first quarter of the year, raising concerns that the oil output target set in the state budget cannot be achieved.

Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) secretary-general Gde Pradnyana said on Tuesday that oil production was currently at around 762,000 barrels of oil per day (bopd), far lower than an 825,000 bopd target set in the state budget.

This should drive the government to look for additional production in the coming months.

Additional output is expected from the ramping up of oil production from the Banyu Urip field of the Cepu block in Central Java, whose production is expected to gradually increase to 80,000 bopd starting in April, a double increase from the current level of approximately 40,000 bopd.

Pradnyana said the block'€™s contractor was currently awaiting approval from the Environment and Forestry Ministry for an environmental impact analysis before it could start ramping up production. The environmental analysis is related to a temporary gas flaring from Banyu Urip'€™s early oil expansion facility.

The Banyu Urip field is being jointly developed by ExxonMobil Cepu Ltd. (MCL), a subsidiary of ExxonMobil Corp., and Pertamina EP Cepu, a subsidiary of state-owned Pertamina.

Once it gets approval, Banyu Urip will have to wait for the completion of its injection facility to be able to expand further and reach peak production of 165,000 bopd. The production peak, which is targeted to be achieved early in the fourth quarter of the year, will be a key contributor to attaining national production of 825,000 bopd.

'€œCepu is now in progress although there is a delay in the [development of] the gas injection. If it is at peak production in October, we can reach 825,000 bopd,'€ said IGN Wiratmaja, the Energy and Mineral Resources Ministry'€™s acting director general for oil and gas, brushing aside concerns of missing the national output target.

Wiratmaja, however, admitted that the current level of around 760,000 bopd was sluggish as oil output was around the 790,000 bopd level at the end of last year.

'€œWells are in a natural decline [of production]. Moreover, there are some contractors that are putting the brakes on drilling,'€ he added.

Oil companies are currently suffering from declining prices '€” which have halved from levels seen early last year '€” that is particularly caused by rising supply over the US shale oil boom. The declining price has pushed companies to recalculate their projects.

Indonesian Petroleum Association (IPA) president Craig Stewart said that given the March production level, reaching 825,000 bopd by year-end would be hard work.

'€œIt'€™s difficult to see that happening,'€ Stewart said. '€œWe haven'€™t seen the full effect [of oil price slump] now, but companies will be cutting back in investment,'€ Stewart said.