Upstream Chief Misleads About Oil Production

UNCLAS JAKARTA 000830

SIPDIS

DEPT FOR EAP/MTS AND EEB/ESC/IEC
DOE FOR CUTLER/PI-32

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET ECON ID
SUBJECT: Upstream Chief Misleads About Oil Production

1.(SBU) Summary: Outgoing Upstream Regulatory Chief Kardaya Warnika
said publicly on April 24 that Indonesia is on track to meet its
national petroleum production targets outlined in the most recent
budget submission to Parliament. In a closed door meeting the day
before, however, the heads of the major foreign oil companies in the
country told Energy Minister Purnomo, Director General of Oil and
Gas Luluk Sumiarso, and Warnika that their collective production was
not likely to meet the government goals for the year. A wide range
of contacts report ministries are under pressure by the president to
demonstrate the fiscal situation remains under control despite
soaring food and commodity prices. End summary.


2. (SBU) Upstream Regulatory Agency chief Kardaya Warnika, who is
soon to be replaced due to poor performance, told reporters on April
24 that Indonesia's crude oil and condensate production averaged
977,600 barrels per day (bpd) until mid April, which was well above
the target of 960,000 barrels in the most recent budget submission
to Parliament. He claimed daily output in February topped 986,840
bpd and output reached 1 million bpd on several days throughout the
first quarter. In 2007, Indonesian production averaged 954,000
barrels bpd, according to GOI statistics.


3. (SBU) On April 23 Warnika summoned all the foreign operators of
production sharing contracts (PSCs) to a closed-door meeting that
same day with Energy and Mineral Resources Minister Purnomo
Yusgiantoro and Director General of Oil and Gas Luluk Sumiarso,
according to several foreign energy company executives who attended.
Warnika opened the meeting, according to the expatriate managers,
by announcing that the government needed help from their foreign
partners to meet their budget targets for oil output. He said all
ministries have been tasked with containing the budget pressures
from skyrocketing food prices and sustained high energy prices. A
wide range of our contacts report ministries are under pressure by
the president to demonstrate the fiscal situation remains under
control despite soaring food and commodity prices. Warnika reminded
the group that the new budget calls for daily production to average
977,000 bpd. He then showed a slide that purported to show each
foreign PSC-holder's current production levels, according to an
expatriate manager who attended. The manager said the list added up
almost precisely to 977,000.


4. (SBU) The assembled group of managers quickly set about
dissecting the numbers, despite their concern about doing so in
front of Minister Purnomo, said our contact. One foreign PSC
holder, which was supposed to be producing this year at 12,000 bpd
according to Warnika's chart, was in reality only producing 1,700
bpd, according to that company's general manager. Another was
supposedly producing at 420,000 bpd, according to Warnika, but that
firm's president said the actual figure was 404,000 bpd. In the
end, the managers told Purnomo that they would do their best to
reach a collective average of 960,000 bpd, but could make no
promises. Many took the opportunity to underscore that their
contractual obligations, as outlined in their annual budgets and
works plans, were below the numbers needed to achieve even the more
modest level of 960,000 bpd. Despite the firm assurances to the
contrary, Warnika left the meeting and promptly informed reporters
about successful efforts of the Upstream Regulatory Agency to meet
its budget numbers.
HUME