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lthough crude prices seem have slowly picked up in recent days, the Indonesian government has remained pessimistic about the outlook of the energy sector and is expecting a significant drop in oil production next year due to a combination of aging fields and slow exploration.

For the last two years, global oil prices have been in free-fall from around US$110 per barrel of Brent crude in June 2014 to around $40 recently.

In anticipation of ongoing price fluctuations, the Energy and Mineral Resources Ministry proposed on Tuesday an oil production target of 740,000 to 760,000 barrels of oil per day (bopd) in 2017, representing a decline of 8 to 10 percent from the 830,000 bopd targeted in the 2016 state budget.

The revised production target is also accompanied by a drastically lowered assumed crude price of $35-45 per barrel, down from an assumed price of $50 per barrel in this year’s state budget.

“One of the challenges will be to revive [oil field] development programs to what they were before,” Minister Sudirman Said told members of the House of Representatives Commission VII overseeing energy in a hearing.

Sudirman said many oil and gas blocks across the nation were aging and would experience a natural decline in production of 20 percent annually. However, he noted that Cepu, the second-largest oil producer in the country, was expected to reach peak production of 165,000 bopd next year.

The Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) claimed that one of the main reasons for the production slump was a lack of exploration, specifically drilling activity, due to low oil prices.

Data from the Energy and Mineral Resources Ministry shows that from January to April this year, only 10 exploratory wells were drilled, yielding three discoveries. The same data shows that 52 exploratory wells were drilled last year, and 83 in 2014. The number of wells drilled has dropped significantly compared to the average of 104 wells drilled per year from 2011 to 2013.

Indonesia’s energy sector has a long history of upward and downward trends. An increase in exploration activity at the beginning of the New Order government resulted in the discovery of new oil reserves and increased oil production from about 600 thousand barrels per day in 1967 to 1.7 million in 1977. After reaching its peak in the late 1970s, upstream oil and gas activity in Indonesia showed a declining trend, as oil companies’ spending on exploration and production remained stagnant.

SKKMigas deputy chief Zikrullah said that currently many oil and gas companies had postponed all well-drilling as crude prices had dropped below $30 per barrel between January and February this year.

The benchmark West Texas Intermediate (WTI) crude oil price stood at $48.26 per barrel on Tuesday evening, representing a 19.5 percent year-on-year drop from $59.97 this time last year, according to Bloomberg. Fellow benchmark Brent Crude recorded a $49.68 per barrel price.

Despite the worrisome drop in oil production, the government is confident that gas production will remain stable. The Energy and Mineral Resources Ministry has proposed a target of 1.05 million to 1.15 million barrels of oil equivalent per day (boepd) next year, from 1.155 million boepd in this year’s state budget.

Meanwhile, state-owned oil and gas firm Pertamina expressed optimism that their production would increase by approximately 8 percent next year due to the anticipated production increase in Cepu block, in which it has 45 percent share, and a predicted increase in production in its oil fields abroad.

Last year, Pertamina’s crude production climbed 11 percent to 606,700 bopd.

“However, some of our fields are old and we have not found any new viable fields,” Pertamina president director Dwi Soetjipto told The Jakarta Post.