T

he continuing decline in crude oil prices will mean that Indonesia will not meet its national oil production target this year and output will likely fall by nine percent, according to the Upstream Oil and Gas Regulatory Task Force (SKKMigas).

SKKMigas has put the oil price at US$20 per barrel, its worst-case scenario, and the price will force oil companies to cut down national oil production to 753,400 barrels of oil per day (bopd).

The figure will be more than 9 percent lower than the target of 830,000 bopd stated in the state budget. The state budget originally put the oil price at $50 per barrel.

'€œThat will happen if companies make no additional investments to maintain their work amid declining revenues because of the price,'€ SKKMigas deputy chief Zikrullah said.

Fewer commitments in the development of oil wells, services and work-over, which are necessary to help the country deal with natural declines in oil production, are the main contributors to low output.

To give a clearer picture, SKKMigas has drawn some scenarios on oil price levels, in which its highest assumption of $40 per barrel will see the country produce 818,900 bopd.

Production is estimated to hit 810,300 bopd at $35 per barrel, 790,100 bopd at $30 per barrel and 780,000 bopd at $25 per barrel.

The country has been struggling to boost production from domestic fields to meet rising energy demand. The country'€™s demand is estimated to soon reach 1.6 million bopd.

The gap between supply and demand has forced the country to import a significant amount of crude oil and petroleum products.

In the past few years, Indonesia frequently failed to meet production targets for various reasons, including unfriendly regulations on taxes and a prolonged permit process that lowered investment appetite.

In 2015, national oil production reached 785,766 bopd, lower than the target of 825,000 bopd.

Oil has long been a major contributor to the country'€™s revenues. However, the portion oil to Indonesia'€™s overall revenues has started to dwindle due to declining production and, now, a plunging price.

The benchmark West Texas Intermediate (WTI) for March delivery was at $32.69 a barrel on the New York Mercantile Exchange, according to figures from Bloomberg. The benchmark Brent for April'€™s settlement was at $34.97 a barrel on the London-based ICE Futures Europe exchange.

Earlier, the price slumped as low as $26 per barrel, the lowest in 12 years and increased worries that the low price would continue plunging for a longer period of time.

Operating under a more frugal policy, state-owned Pertamina is planning to reduce its operational expenditure by around 30 percent. Meidawati, the company'€™s senior vice president for strategic planning and operation evaluation, said many projects would be postponed.

'€œThe number of development wells to be worked this year will be reduced to 96 from 149. However, we will increase work-over wells to 194 from a previous plan of 186,'€ she said.

The company will also reduce work on the exploration of wells to 23 from 34.

As a consequence, the company is estimating that its production will reach 296,000 bopd, lower than a previous plan of 326,000 bopd. '€œThese are the assumptions for $30 per barrel.'€