T

he government is optimistic that the country will be able to reach next year’s oil production target despite it being set slightly higher than the initially proposed figures.

On Tuesday, the government and House of Representatives’ budget committee agreed to set the oil production target in the draft 2017 state budget at between 750,000 and 790,000 barrels of oil per day (bopd).

Energy and Mineral Resources Ministry director general for oil and gas, IGN Wiratmaja Puja, said the target was still reasonable as it was not much different from the initial target of 740,000 to 760,000 bopd.

“It is still achievable because [our initial target] is within the new range,” he told reporters on Wednesday.

The maximum target of 760,000 bopd had initially been proposed by the government as many oil and gas contractors had suspended exploration and well-drilling activities in the past two years due to low global oil prices.

Data from the Upstream Oil and Gas Special Regulatory Task Force (SKKMigas) shows that only 13 percent of all planned seismic and non-seismic surveys had been conducted as of June. Furthermore, only 30 percent of 441 development wells had been drilled so far.

However, things have slowly been looking up since the beginning of the year. Benchmark West Texas Intermediate (WTI) traded at US$45.09 per barrel on Wednesday from around $30 in January, according to figures from Bloomberg. Meanwhile, Brent Crude traded at $46.59 per barrel.

The rising oil prices have led the government and House to agree on setting the Indonesia Crude Price (ICP) at $40 to $50 per barrel as the Energy and Mineral Resources Ministry predicts that although the global oil price will trade at around $40 per barrel in the beginning of next year, it will reach the $60 per barrel point by year-end.

SKKMigas deputy head Zikrullah was also optimistic that oil production will stay within the new targeted range as there was much leeway.

He noted that the House’s original request to make the maximum production target 800,000 bopd was difficult to meet, especially since it considered that there were many planned upstream activities that had been postponed until next year due to falling global energy prices.

“The 760,000 bopd target can be achieved since the range is between 750,000 to 760,000 bopd. So, hopefully we will be able to stay within this range,” Zikrullah said.

Although six plan of development (POD) oil fields will start production next year, it would still be difficult to reach the 800,000 bopd mark as they are set to only start operating in the second and third quarters of 2017.

Indonesia’s energy sector has a long history of upward and downward trends. An increase in exploration activities at the beginning of the New Order period resulted in a boost of new oil reserves which increased oil production to 1.7 million bopd in 1977. However, upstream oil and gas activity has since declined due to oil company spending on exploration and production remaining stagnant.