New Report Available: Indonesia Oil & Gas Report Q4 2013

From: Fast Market Research, Inc.
Published: Wed Oct 02 2013

BMI View: Although oil and gas exports are some of the key contributors to the Indonesian economy, 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 is 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.

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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 4.0bn barrels (bbl) of oil at the beginning of 2013 to 3.8bn bbl in 2017, falling further still to 3.6bn 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 3.0-3.1trn cubic metres (tcm) through to 2017, following which it will decline slightly to 2.9tcm 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 - coal-bed methane and shale gas.
* We expect total liquids production (including refinery processing gains) to rise to 933,300b/d in 2014 and 939,500b/d in 2015 owing to major fields finally coming on-stream or ramping up to their full production capacity. Thereafter, in the longer term we see oil output trending downwards to 887,300b/d in 2017 and hitting a low of 803,200b/d by 2022.
* We have downwardly revised our oil consumption forecasts following the government's decision to reduce fuel subsidies. The drop in demand in the short term would be more drastic as the public responds to price increments. Hence we have forecast for demand in 2013 to fall, though it is expected to make a partial recovery by 2017, thus explaining our expectations for a dip in demand from 1.28mn b/d in 2012 to 1.25mn b/d in 2017. In the medium-to-long term, partial fiscal relief and optimism about economic growth underpins our view for a reversal of this trend as consumption rises to 1.32mn b/d by 2022.

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