Spending on energy projects in Indonesia to be slashed by 20 percent

Jakarta: With global oil prices plummeting 40% since June spending on energy projects across Indonesia is likely to be scaled back by around 20% next year, while energy firms are unlikely to spend as much they originally planned to this year, according to the Indonesian Petroleum Association’s (IPA) director, Lukman Mahfoedz.

Projects which are most at risk would be those that have not started development, those that are mature or those that are technologically challenging and therefore high cost. The biggest of these projects would be IDD, Abadi, Muara Bakau and Offshore North West Java, energy research firm Wood Mackenzie reckoned.

IPA newly-appointed president Craig Stewart said the current low price would also be a challenge for old fields.

“Most old PSCs [production sharing contracts] require a huge amount of capital investment to maintain production. They have to look at incremental investment to sustain production and each of those investments will have a break-even-price,” Stewart said.  [10/12/12]

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