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NEWS UPDATES 7 October 2010

Indonesia to sell 60 percent of oil stocks

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The Indonesian government on Wednesday said it would sell about 60 percent of the nation's stock of crude oil by December to make up for lost revenue this year as national output looked likely to fall short of its target.

Evita Legowo, director general of oil and gas at the Ministry of Energy and Mineral Resources, said the government planned to sell a total of 7.2 million barrels of crude oil from its stock by the end of November, including the three million barrels announced last month by upstream oil and gas regulator BPMigas.

Evita declined to estimate the national output for the full year, but said the recent shutdown at the Duri and Minas oil fields in Sumatra had likely put the target of 965,000 barrels per day - projected for revenue purposes in the 2010 state budget - out of reach.

She noted that Chevron Pacific Indonesia, which accounts for 40 percent of national output, had been operating at full capacity before a gas leak last week forced it to shut down, meaning it would be difficult at best for it to make up for lost production.

BPMigas has said more than 150,000 bpd of production was lost since the shutdown on Sept. 29.

Pri Agung Rakhmanto, an energy analyst at the Reforminer Institute, said selling so much of the nation's stockpile posed a danger to short-term energy security.

"Our oil stock only covers 12 days of emergency sales. It is a reckless move," he said.

Pri Agung said the move would add pressure on producers over the coming years as they tried to reach the production targets while replenishing the nation's stocks.

Under pressure from lawmakers, the government has proposed raising the target for next year to 970,000 bpd. Average production for this year was 956,000 bpd as of the end of September.

Output has been declining for years because of aging fields and stagnant investment.

A leak in a gas pipeline used to power operations at the Duri and Minas fields last week forced CPI and Pertamina-Bumi Siak Pusako, a unit of the state oil and gas company, to stop production for several days.

The leak has been patched, but production must be resumed gradually and has not yet returned to full volume.

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