Monday May 17, 10:13 AM
EXCLUSIVE: Indonesia Becomes A Net Crude Oil Importer

By I Made Sentana
Of DOW JONES NEWSWIRES

JAKARTA (Dow Jones)--Legal uncertainties over new oil and gas laws
made Indonesia a net importer of crude for the first time in March,
undermining the country's membership of the Organization of Petroleum
Exporting Countries.

Indonesia, Asia's only member of OPEC, imported an average 484,000
barrels of crude oil per day in March, and exported 448,000 b/d, a
government official told Dow Jones Newswires Monday.

Imports rose further to 503,000 b/d in April, while exports dropped to
413,000 b/d, the official said on condition of anonymity. Indonesia
releases the value of monthly oil and gas trade, but doesn't
separately detail figures for crude.

The country has often been a net importer of refined oil products, but
this is the first time it has brought in more crude from abroad than
it has exported.

Although new projects due online later this year might boost output,
the latest figures are a worrying sign. Last November, oil minister
Purnomo Yusgiantoro said output would increase from just over 1.0
million b/d then by some 150,000 b/d in 2004.

"It's a clear warning that there's something wrong with the management
of the country's oil and gas resources," said Kurtubi, the director of
the Center for Petroleum and Energy Economics Studies, a local
independent oil and gas industry think-tank.

Indonesia's crude oil output was around 980,000 b/d in April,
according to a recent survey by Dow Jones Newswires, down from over
1.3 million b/d three years ago. This has been primarily a result of
sluggish investment and a lack of exploration for new fields.

Declining crude oil output will further diminish Indonesia's already
minor role within OPEC, and could threaten its membership in the
future if the country remains a net importer of crude, analysts say.

Can't Meet OPEC Quota

The nation already can't meet its daily OPEC output quota of 1.2
million b/d, making it one of the few members that don't overproduce.
Saudi Arabia, the world's largest producer, has an official daily
output some eight times that of Indonesia, and hugely larger proven
reserves.

Problems in the sector also highlight Indonesia's failure to take
advantage of its abundant natural resources since the fall of former
authoritarian President Suharto in 1998.

With crude oil prices now at 13-year highs above $41, the
cash-strapped government is missing out on a bonanza, analysts said.

Large foreign oil and gas companies say Indonesia's new democracy has
failed to set down clear guidelines for investing in the sector since
Suharto's ouster.

The government promulgated a new oil and gas law in 2001, but failure
to introduce supporting legislation has caused widespread confusion.

Provincial governments, which are demanding a larger say over how to
use their resources under new decentralization rules, further add to
the chaos, foreign oil executives say.

"How are we going to play if there's no rules of the game," said an
executive with an international oil and gas company in Jakarta.

Even where foreign oil companies want to move ahead, squabbling
between the government and PT Pertamina, the state-owned oil and gas
company, has delayed projects.

Under the new oil and gas law, the government stripped Pertamina of
regulatory role, but the state-owned company still wields a large and
ill-defined power, say people working in the sector.

Exxon Mobil's (XOM) plans to develop the country's largest oil
discovery since the 1960s have been on hold for four years due to
Pertamina's demand for a higher stake in the project.

The field, situated in Central Java, has likely maximum reserves of 1
billion barrels, an important find for a country with only 10 billion
of total proven and probable reserves.

But development of the field can't move ahead until Exxon Mobil and
Pertamina reach an agreement.

Attractive Terms For Producers

Still, the government is optimistic it can boost output. New
production is expected to come online later this year from 14 fields,
including those operated by Unocal Indonesia, Total Indonesie,
PetroChina, and ConocoPhillips Indonesia.

In a bid to attract investors, the government decided last year to
offer up to 25% of revenues from oil fields to its joint-venture
partners, up from a normal 15% split.

As a result, the number of new contracts to explore for oil and gas
rose to 15 in 2003 from one in 2002, but remained much lower than a
record 29 contracts in 1997.

Major international companies were still largely absent from the
bidding for these new blocks, and the winners were mostly local
companies with relatively less experience and funding.

Indonesia could have up to 50 billion barrels in reserves under its
land and oceans, according to government studies.

Attracting foreign capital to help unlock these reserves will be key
to ensuring the country doesn't become dependent on crude imports over
the long term, analysts said.

(Deden Sudrajat in Jakarta contributed to this article)

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Low Ee Mien
Singapore
http://www.jroller.com/page/lowem