Indonesia may achieve its oil target of 900,000 barrels of oil per day (bpd) in 2015 as the Banyu Urip field in Cepu (East Java) is expected to start production in February next year. Indonesian upstream oil and gas regulator SKKMigas stated that the oil field has now been completed for 92.5 percent. The oilfield’s early production facility is already producing 30,000 bpd. This is expected to increase to 165,000 bpd once production has reached its peak in mid-2015. This peak level is estimated to last for three years.
This year, Indonesia’s House of Representatives (DPR) targets domestic oil production of 818,000 bpd (set in the Revised 2014 State Budget). However, the country - Southeast Asia’s largest economy - will probably fail to achieve this target as the oil production rate stood at 797,000 bpd only in the first half of 2014.
Indonesia’s oil production has been declining for almost two decades amid a lack of investments in combination with maturing oil fields. Generally, the decline in Indonesia's oil production (lack of exploration) is often blamed on weak government management, bureaucracy, an unclear regulatory framework and legal uncertainty regarding contracts.
Therefore it is important that several large new oil projects will become operational. Apart from the Banyu Urip, the Bukit Tua oil field (part of the Ketapang block in East Java) is another relatively large field which is expected to start production (around 20,000 bpd) in the first quarter of 2015.
The Banyu Urip oil field, which will account for 20 percent of total oil output in Indonesia once its peak production rate has been reached, constitutes the largest oil reserves (containing around 450 million barrels of oil) that Indonesia is yet to exploit. In this USD $2.5 billion project Mobil Cepu (subsidiary of US-based oil and gas firm Exxon Mobil) Pertamina EP Cepu (subsidiary of state-owned enterprise Pertamina hold a 45 percent stake, each. The remaining 10 percent is held by Badan Kerja Sama Blok Cepu.
In 2013, Indonesia produced a total of 825,000 bpd. This is far from the country's oil production peak of 1.6 million bpd in 1995 during the Suharto regime. The country imports 350,000 barrels of crude oil per day and 500,000 barrels of fuel per day to meet domestic consumption.