2013-03-11 12:33:33 - New Energy research report from Business Monitor International is now available from Fast Market Research
BMI View: Oil and gas exports form one of the key pillars of the Indonesian economy, although the outlook for the sector is becoming increasingly uncertain given dwindling oil reserves in the country's maturing fields. We forecast a long-term decline in total liquids production and a stagnation of gas production. This is mainly a result of the slow pace of exploration and development, which could be exacerbated by an increasingly uncertain regulatory environment as resource nationalism creeps into the government's policy towards the sector. Opportunities for exports will be further compromised by the domestic market's increasing energy demand. Hence, falling oil and gas exports is another key trend we identify for Indonesian oil and gas.
The main trends and developments we
highlight for Indonesia's oil and gas sector are:
* We forecast that oil and gas reserves will most likely be on a downward trend in the coming decade: oil reserves are expected to decrease from an estimate of 3.9bn barrels (bbl) of oil at end-2012 to 3.5bn bbl in 2017, falling further still to 3.3bn bbl by 2022. For gas, we expect reserves levels to be stagnant as additions from exploration successes in East Kalimantan cancel out natural depletion from existing fields. Reserves are forecast to stay flat at about 3.9trn cubic metres (tcm) through to 2018, following which it will decline slightly to 3.8tcm unless the pace of drilling activity picks up.
* Despite this outlook, we highlight that Indonesia is a country where much potential continues to exist. If the country relaxes its nationalist stance on resources, there is considerable upside potential for both oil and gas reserves - greater drilling of its unexplored deepwater areas and its unconventional resources - namely coal-bed methane, but also possibly shale gas.
* We expect total liquids production to fall to 909,070 barrels per day (b/d) in 2014, continuing the downward trend in place since 2001. While production will rise slightly to 915,950b/d in 2015 owing to major fields finally coming onstream or ramping up to their full production capacity, in the longer term we see oil output trending downwards to 865,100b/d in 2017 and hitting a low of 783,110b/d by 2022.
* Supported by strong economic growth, demand is set to increase from an estimate of 1.41mn b/d in 2012 to 1.60mn b/d in 2017, rising further still to 1.81mn b/d by 2021. With demand outstripping supply, the country's import requirement will continue to rise, from an estimate of 471,400b/d in 2012 to 737,100b/d to 2017 and could further soar to 1.03mn b/d in 2021.
* Owing to production problems, we expect total gas production to have fallen to 70.5bn cubic metres (bcm) in 2012. However, with major gas projects expected onstream in the next five years, we project a rise in production to 76.4bcm in 2017. Declining production rates will be cancelled out by new gas developments, namely Total's South Mahakam project, Chevron's Gendalo-Gehem development, Royal Dutch Shell's Abadi field and Eni's Jangkrik projects. Thus we expect production levels to stay relative stagnant at 76.1bcm by 2022.
* The country's gas consumption is estimated at 38.6bcm in 2012, a slight downward revision from our previous estimate, as we expect consumption to have been partially curbed by shortages. With an increasing amount of new gas from projects reserved for the domestic market, this allows room for domestic gas demand to grow to about 47.5bcm in 2017 and hit 55.0bcm by 2022.
* The faster rate of growth in consumption to production means that gas exports could initially increase from an estimate of 31.8bcm in 2012 to 32.3bcm in 2015, but we expect an increasing application of the 40% domestic gas reservation rule to eventually apply to both existing and future gas projects. Hence, from 2016, despite an expected increase in LNG production capacity, net exports are likely to fall to 29.0bcm by 2017 and 21.1bcm by 2022.
* Steps are being taken to cope with rapidly rising demand for fuel and electricity. The government has been considering scrapping fuel subsidies for private cars - starting on April 1 2012 in Greater Jakarta and later for other parts of Java and Bali. However, these have been met with considerable political opposition.
* The government and House of Representatives have agreed that new contracts could limit gas exports to 50% or less of total production. The Energy and Mineral Resource Ministry also implied that contract renegotiations could be in place if they are deemed not to be 'beneficial' for the country. This could challenge industry interest in new gas blocks, and could adversely affect the rate of development of its unconventional resources.
Full Report Details at
At the time of writing we assumed an OPEC basket oil price for 2013 of US$104.40 per barrel (bbl), falling to US$101/bbl in 2014. Global GDP in 2013 is forecast at 2.9%, up from an assumed 2.5% in 2012, reflecting some recovery in the US and China, though uncertainty with regard to the eurozone debt situation will continue to hamper growth. For 2014, growth is estimated at 3.4%.
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