S

tate-owned oil and gas giant Pertamina will lower its operational expenditure in a response to an ongoing decline in crude prices, which are now around half of the company'€™s estimation.

Pertamina president director Dwi Soetjipto said on Friday that the company would reduce its operational expenditure by 30 percent. He said that reduction in operational expenditure would be necessary as it wanted to maintain investment in the upstream sector.

'€œWe will try to cut our costs through renegotiation of drilling services, evaluation of explorations and other activities. However, we will maintain our capital expenditure in upstream activities because the company'€™s upstream segment is lagging behind demand and periods of low prices are actually the best time to invest,'€ Dwi said.

He added that the current oil price below US$30 per barrel was far lower that the company'€™s estimate of $50 per barrel.

The benchmark West Texas Intermediate (WTI) price for February delivery was around $29.7 per barrel on Friday, according to figures from Bloomberg. The other benchmark, the Brent crude, touched $29.85 per barrel, the lowest level in 12 years.

Pertamina has earmarked $5.31 billion in investment to support activities from the upstream to the downstream sector in 2016, rising around 20 percent from the disbursed amount in 2015. Of the total amount, 72 percent or around $3.8 billion will be allocated to upstream business. The company is aiming to report total oil production of 327,000 barrels per day (bopd) and gas production of 1,926 million standard cubic feet per day (mmscfd).

The current decline in oil price has put big pressure on oil companies that enjoyed prices of more than $100 per barrel in early 2014. Analysts have attributed the sharp plunge in the past year to global glut in the wake of a US shale oil boom. The price drop has forced companies to halt high-cost projects.

Global research firm Wood Mackenzie said earlier on Thursday that an additional 22 major projects and seven billion barrels of oil equivalent (boe) of commercial reserves had been deferred in the last six months of 2015. The figures were additional to earlier estimates that 46 developments and 20 billion boe of reserves had been deferred. The firm added that deepwater projects accounted for more than half of the total as companies are forced to rework projects with high breakevens, large capital requirements and high costs.

'€œThe countries with the largest inventories of delayed oil projects are Canada, Angola, Kazakhstan, Nigeria, Norway and the US, which hold nearly 90% of all deferred liquid reserves. This includes oil sands, onshore, shallow-water and deepwater assets in both greenfield and incremental developments,'€ said Angus Rodger, Wood Mackenzie principal analyst for upstream research.

'€œThose with the largest gas reserves are Mozambique, Australia, Malaysia and Indonesia, which combined hold 85% of the total volume. The majority of this gas is found offshore, primarily in deepwater locations, and requires complex and expensive development solutions, including greenfield LNG and FLNG,'€ he added.

Figures from the Oil and Gas Regulatory Special Task Force (SKKMigas) showed that the country'€™s cost per barrel was $22 on average. However, there are numerous fields with far higher production costs per barrel, particularly those located in offshore and remote areas.