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INDONESIAN COMMERCIAL NEWSLETTER
MARKET INTELLIGENCE REPORT ON

PETROLEUM INDUSTRY IN INDONESIA

October 2007


Current issues

Increase in oil prices feared to cause a drag on Indonesian economic development in 2008

The prices of crude oil have been on the increase lately  triggered by a number of factors including Middle East conflicts notably in Iraq and mounting tension between Iran and the West over nuclear issue, and the falling value of the U.S. dollar against euro and other major currencies.

Prediction of an increase of world's oil consumption also contribute to the pushing up the prices. The IEA predicted the world's consumption of crude oil in 2008 will rise 2.3 million barrels a day. An increase in the prices of crude oil  may cause a decline in Indonesia's  economic growth in 2008.

Inflation will likely increase weakening the  purchasing power of the people and falling purchasing power will cause a decline in consumption, which has been a major driving motor  for the country's economic growth in the past several years. The cash strapped government may be forced to raise the oil fuel prices further worsen the condition.


Government encourages  increase in oil production in 2008

The government has continued to encourage efforts to increase the country's oil production. Chevron is expected to  increase its crude oil production from its oilfields in Sumatra by 10,000 bph. Pertamina EP also hopes to see a 28% increase in its oil production this year. BP reported a 50% increase in output from its offshore oil field  in the Java Sea and ConocoPhillips raised output by 250% from its Belanak oil field.

Late October, a number of oil and gas contractors signed contracts valued at US$ 8 billion Meanwhile, the government offered 26 more oil blocks which are expected to bring in US$ 445 million in new investment.

Indonesia ranked among 23 largest oil producers in the world  in 2006. Intensive exploitations involving multinational companies have rapidly reduced known oil reserves. In 2006, Indonesia's oil production totaled  1,061,000 bbl/day  with a reserve of  4.4 billion barrels. The country's production was larger  than that of Qatar which had a reserve of four times larger.

Crude oil and condensate production shrinking

The country's production of crude oil and condensate has continued to decline since 1997 - from 543,753,000 barrels consisting of 484,341,000 barrels of crude oil and 59,412,000 barrels of condensate to 534,892,000 barrels in 1998  and to 366,825,000 barrels in 2006 consisting of 322,295,000 barresl of crude oil and 44,895,000 barrels of condensate.

Indonesia's production of crude oil in 2006 was dominated by  production sharing contractors (PSC), PSCs produced  324,733,263 barrels in 2006 including 215,600,709 barrels from onshore and the rest from offshore.

Pertamina (onshore) was the second largest producer of crude oil in Indonesia in 2006  with  production of  18,905,887 barrels  or  51,797 barrels per day.

Chevron Pacific Indonesia  (CPI) largest producer

Chevron Pacific Indonesia is the country's largest producer of crude oil with production totaling 162,160,749 barrels in 2006 or almost  50% of the country's  total production in the same year. Production of Pertamina in 2006 totaled 42,315,938 barrels, followed by  ConocoPhillips  with  production  of  23,380,513 barrels. ................................

MONTHLY REPORT

INDONESIAN  COMMERCIAL NEWSLETTER
       
October 2007

       



FOCUS:  IMPACT OF SOARING OIL PRICES ON INDONESIAN ECONOMY        1


INDUSTRY PROFILE: PETROLEUM INDUSTRY IN INDONESIA        5
  • Current issue        5
  • Government encourages increase in oil production in 2008        5
  • Development of World's oil industry        7
  • Riau dominates oil production in Indonesia        9
  • Explorations        10
  • Crude oil and condensate production shrinking        12
  • Production of crude oil and condensate 2006        12
  • Chevron Pacific Indonesia (CPI) largest producer        13
  • Imports of crude oil rising        14
  • Imports by country of origin        15
  • Exports of crude oil declining        15
  • Japan the largest buyer crude oil from Indonesia        16
  • Major oil producer in Indonesia        16
  • Price of crude oil        25
  • Price of crude oil in 2007 leapfrogging        25
  • Government offers oil and gas blocks to investors        26
  • Mergers and acquisitions        27
  • Prospects and conclusion        28

OIL REFINING INDUSTRY        29
  • Current issue        29
  • Characteristics of products        29
  • Refines and production capacity        30
  • Production        34
  • Cilacap and Balikpapan refineries the largest        35
  • New investment        35
  • Tuban refinery project        37
  • Exports down        34
  • Imports fluctuate        38
  • Consumption        39
  • Price of BBM for industry up        39
  • Transport sector the largest consumer        40
  • Conclusion and prospects        40

COMPANY PROFILE:
  • MEDCO GROUP        41
  • PT. PERTAMINA        50

TRADE:  MARKETING AND DISTRIBUTION OF OBF IN INDONESIA        55
  • Backgrounds        55
  • Types of OBF commodities        55
  • OBF market still dominated by Pertamina        57
  • Pertamina's storage facilities        62
  • Flow of OBF from refinery or importing Port to different Destinations        63
  • Marketing units        66
  • Commercial distribution area (WDN)        66
  • OBF prices        67
  • Prospects and conclusion        70

INDUSTRY: IMPORTED BRANDS A THREAT TO PERTAMINA'S DOMINATION OF LUBRICANT MARKET        71
  • Current issue        71
  • Exports        72
  • Producers of lubricant in Indonesia        72
  • Pertamina's products dominate market        73
  • Main players in lubricant market        73
  • Promotion key to success in competition        74
  • Conclusion        74

CORPORATE NEWS IN BRIEF:
  • KS seeks alliance with four world's major steel makers        75
  • Pertamina wins an oil contract in Qatar        75
  • Straits Asia acquires two coal mining companies in Indonesia        75
  • Reykjavik to invest US$ 2 billion in geothermal power project        75
  • Major banks offer loan for food giant        76
  • Antam to team up with Tsingshan to develop nicjkel mines in OBI        76

ECONOMIC NEWS IN BRIEF:
  • LNG export contract with Japan to be reviewed        77
  • United States imposes anti dumping duty on Indonesian paper        77
  • Fish exports to China continue despite boycott        77
  • Only 25 ports open for ocan going ships        77
  • 38 foreign garment makers to move operation to Indonesia        78
  • Increase in DMO proposed on natural gas        78
  • Anti dumping duties may be imposed on steel imports from five countries        78

APPENDICES:
  • Directory of petroleum companies in Indonesia        79

ECONOMIC INDICATOR:
  • Consumer Price Index in Indonesia        81
  • Oil Prices        82
  • Foreign Exchange and Gold Price in Indonesia        83
  • The Indonesian Economic Trends        84

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