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Indonesia's oil output may drop by 2008

(JAKARTA) Indonesia, South-east Asia's biggest oil producer, will be unable to prevent production declining within four years without increased exploration spending to find new fields, Energy Minister Purnomo Yusgiantoro said.

The Organisation of Petroleum Exporting Countries' (Opec) only Asian member outside the Middle East needs to find new fields to sustain production worth more than US$30 million a day at current prices, Mr Purnomo said. New discoveries take about a decade of development before production starts, he said.

PT Caltex Pacific Indonesia, a unit of ChevronTexaco Corp, is Indonesia's biggest oil producer.

'We are not dealing with a renewable resource - we are dealing with depletion,' Mr Purnomo said. 'What we try to do is to maintain production at a level that's above one million barrels every day.'

Investment in Indonesia's oil and gas industry, which accounts for one-eighth of the state's revenue and a quarter of its exports, will rise to US$7.5 billion this year, from US$5.3 billion last year, Mr Purnomo said. While that's the highest since the 1997 financial crisis, Indonesia needs to do more to ensure the long-term viability of an industry key to stability in the country.

The incoming government after Monday's presidential election may help move that along, said Wahyudin Yudiana Ardiwinata, head of Caltex Pacific Indonesia. 'The new government needs to improve the investment climate because the country's oil and gas production is declining, and the level of investment commitments is not what we expected,' he said.

'Indonesia needs to make sure that we have the right regulations and remove the obstacles so it can become more attractive for investors. If you see independent comparisons between production-sharing terms for Indonesia and terms for other countries, Indonesia ranks very poorly,' Mr Wahyudin added.

Mr Purnomo, who is also the Opec president, said oil output would decline by 15 per cent a year without the investment in exploration and production. Indonesia is one of only two Opec members that are producing below the limit set by the group.

Indonesia, which faces budget deficits until 2006, needs increased revenue from its natural resources to lower a budget deficit forecast at 24.4 trillion rupiah (S$4.6 billion) this year.

Caltex Pacific Indonesia pumps about half of the country's 1.1 million barrels of crude oil a day. The nation's other oil and gas producers include Exxon Mobil Corp, Unocal Corp and Total SA. - Bloomberg

Editorial Notes: ASPO suggest that Indonesian oil production actually peaked in 1980, with a second lower peak in 1995: www.peakoil.net/uhdsg/Indonesia.html

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