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NEWS UPDATES Asean Affairs        10 January 2011

Indonesia hopes stricter supervision reduces oil shutdowns

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With demand for oil and natural gas rising as the economy continues to grow, the government is taking steps to keep a closer eye on the resources.

It plans to tighten supervision of oil companies' production to reduce losses from unplanned shutdowns, a government official said last week.

"We have a special program to watch over oil production so the number of unplanned shutdowns will be reduced," said Evita Legowo, director general of oil and gas at the Energy Ministry.

According to the upstream oil and gas regulator, BPMigas, 59 percent of the country's total oil loss last year came from unplanned shutdowns that resulted in losses of 14,819 barrels per day.

A leak in a gas pipeline operated by Transportasi Gas Indonesia that transferred fuel to Chevron Pacific Indonesia in Duri, Riau, forced CPI to shut down 2,420 wells in November.

Losses from the accident were initially estimated at 500,000 barrels of oil, though that figure was later revised down.

Oil production reached 954,000 bpd last year.

That was below the target of 965,000 bpd the government included in its 2010 state budget.

The government raised its target to 970,000 bpd for 2011, though oil and gas companies forecast a more pessimistic 952,300 bpd.

Evita said the government would form teams of experts to research and watch over companies' maintenance practices to reduce unplanned shutdowns.

Raden Priyono, the head of BPMigas, said stricter supervision was only one step toward optimizing oil production.

Another step, he said, was sorting out problems that companies face in extracting oil and gas in Indonesia, particularly land acquisition and environmental regulations.

"I am sure that we will still meet our target," he said.

The government on Dec. 20 announced new regulations it said would reduce uncertainty in the oil and gas industry and attract more investment.

However, the Indonesian Petroleum Association has voiced concern that the new regulations would have little, if any, effect on improving investment.

Sammy Hamzah, vice president of the IPA, said the regulations would discourage investors rather than provide them an incentive to invest.

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