[Unpad.ac.id, 20/03/2016] The decline of world crude oil prices ranged between 30-40 US dollars/barrel nowadays is lowest in the last 15 years. Although this causes fuel prices to decline, the condition is actually harmful to business of national oil and gas upstream sector because exploration and production activities are expected to decline.
Professor of Faculty of Economics and Business (FEB) Unpad Prof. Dr. Ina Primiana, SE., MT., said that the decline of exploration and production activities was caused by expensive cost and difficulty of licensing. On the other hand, the decline in oil prices is expected to increase oil consumption.
“Oil lifting target set in the state budget amounted to 830 thousand barrels/day also will not be achieved,” said Prof. Ina as a speaker at Seminar of “Management of Indonesia Oil and Gas Industry and Influence of Crude Price Today: A Pentahelix Collaboration “at Hall of Management Magister Unpad, Jalan Dipati Ukur No. 46 Bandung, Saturday (19/03).
The seminar that was organized by Program Study of Doctoral Management Science presented speakers representatives of Pentahelix collaboration initiated by Unpad. Besides Prof. Ina, presented speakers were Dr.Naryanto Wagimin (ESDM Director General of Oil and Gas Technical Director), Sigit Rahardjo (UTC Vice President of PT. Pertamina), Benny Lubiantara (Expert Council of the Association of Indonesian Petroleum Engineering) and Arief Budisusilo (Chief Editor of Bisnis Indonesia).
Prof. Ina explained that this price reduction occurred because world oil supply is higher than the level of demand. The discovery of shale oil as new oil reserves in the United States caused the US to no longer to import oil, so that the world’s oil supply is now plentiful.
Furthermore, Prof. Ina said, after the drop in oil prices, domestic oil and gas sector’s contribution to the budget is also reduced. Contributions ranged between 30-100 trillion, or about 85% of the budget target is not met. While the consumption of oil has now reached around 1.6 million barrels/day.
“As a result we have to import,” said the Head of Study Program Doctor of Management Science Unpad.
Oil and gas reserves in Indonesia are also predicted to continue the decline. Prof. Ina said, Pertamina only controlled about 10% of total oil and gas reserves in Indonesia. These reserves are expected to be exhausted within the next 11 years if Pertamina did not add oil and gas reserves.
The decline in world oil prices is not expected to recover any time soon. IMF Organization estimated that world oil prices will continue to fall until the next 5-10 US dollars/barrel. According to Benny Lubiantara the process of recovery until 2020 predicted price is still difficult to get back to the level of 80 US dollars/barrel.
He also mentioned the decline of oil and gas production in Indonesia. The fall in oil prices has not matched the decline in exploration costs. The reduction percentage in exploration costs is usually only 30% during the decline of oil price falling to 60%. Therefore the cost is still the main difficulty of exploration and production for oil and gas upstream sector players.
“Can these costs be lowered again in order to help the economy and the current price?” asked Benny.
Furthermore Benny explained that the low oil prices condition is actually an opportunity for the upstream oil and gas industry to explore. Companies should be able to perform business efficiency in advance in order to reduce production costs.
“The exploration is to increase the number of our oil and gas management. Do not let the potential of our oil and gas continues to be managed by a foreign party, “said Benny. *
Reported by Arief Maulana / eh
