Indonesia Expects Lower Oil Exploration Spending In 2010

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Indonesia, southeast Asia's biggest economy, said it expects oil contractors to spend $2.3 billion on exploration projects in the country in 2010, down from an estimated $2.7 billion in 2009. Indonesia produced 949,100 barrels of crude per day in 2009, missing its goal of 960,000 barrels per day. The country produced 1.5 million barrels a day in the 1990s, but has since become a net importer of oil, according to press reports.

Indonesian officials said spending is expected to be lower in 2010 because oil companies are uncertain regarding cost recovery issues. The country has in the past reimbursed companies for exploration and production costs, but the Indonesian parliament may revise that agreement making explorers reluctant to invest in projects there, according to press reports.

Chevron (CVX), the second-largest U.S. oil company and ConocoPhillips (COP), the number three U.S. oil producer, are among the foreign companies operating in Indonesia. France's Total (TOT) also operates in Indonesia, but the country has had problems attracting additional foreign investors to its oil assets due to mature fields with diminishing output.

Press reports said Indonesia has offered new exploration rights and is working to provide better incentives to oil and gas companies, but that may not be enough to encourage further investment in Indonesia's oil assets, many of which lie in locations that are expensive to drill and hard to reach.

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