Government to Change ICP Formula

The government plans to change the formula for calculating the Indonesia Crude Price (ICP). Evita Herawati Legowo, Director General of the Oil and Gas at the Ministry of Energy and Mineral Resources, said that the 10 types of crude oil which have been defined as ICP reference are no longer completely feasible with their falling production. The 10 types include Anoa, Attaka, Badak, Bekapai, Kaji, Ramba/Tempino and Tanjung.
As a consequence, the government plans to incorporate international oil types such as Brent (London) as one of the crude types for ICP reference.

The new formula is expected to be complete in June by implemention in July, Evita said. “However, should it be difficult to apply, the government will still use the existing one,” she said.

As of April 2011, ICP reached US$ 109.21 per barrel. During the first quarter, the highest point was posted in April at US$ 123.36 per barrel, while the lowest was in January at US$ 96.09 per barrel.

The price of Anoa crude oil produced by Premier Oil from Anoa field, Sulawesi, was recorded as the highest ICP in the first quarter. In April, it reached US$ 126.60 per barrel, up from US$ 117.08 per barrel.

The ICP hike over the period has not been counterbalanced by the national oil production. As of April it only reached 907,199 barrels per day or 93.53 percent of the 2011 State Budget target at 970 thousands barrel per day, said R. Priyono, Head of the Upstream Oil and Gas Regulatory Agency.
Meanwhile, oil lifting production reached 92 percent of the target or 892,400 barrels per day. “The state revenue from oil and gas lifting was US$ 12.16 billion as of April, or 37 percent higher than the US$ 8.85 billion target," he said.

With the achievement, oil production will reach 945 thousand barrels per day this year. It may fall to around 12 thousand barrels per day should the production be disturbed. "The minimum production is 933 thousand barrels per day," he added.

If oil lifting reaches 933 thousand barrels per day and gas lifting is at 7,808 billion british thermal unit per day, the state revenue potential will be US$ 31.088 billion or 17 percent more than the US$ 26.554 billion target, Priyono said.

Satya W. Yudha, a member of Commission VII at The House of Representatives, supports the government's plan. However, the ICP formula must represent crude oil types with overseas market shares.