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Oil production in Kitan-Bayu Undan in decline

Dili Weekly - April 29, 2016

Venidora Oliveira – With oil production in Kitan and Bayu-Undan is in steep decline, there are calls for the Timorese government to boost state revenue by developing other sectors.

The Luta Hamutuk organization said the government could no longer rely on oil revenues to grow the country's economy. Executive Director Mericio Akara said Kitan oil field is currently producing a maximum of just 5000 barrels per day. In the past, it produced an average of 10,100 and up to 95,000 barrels.

"It cannot be productive globally anymore. It costs $31 or $32 for each barrel and the reserve is getting lower so the company decided not to produce it anymore," said Akara at his office in Farol, Dili.

Timor-Leste remains heavily dependent on oil funds, which is the main source of government revenue. However, if oil prices remain the same next year, it's predicted that oil revenues will reach only $450 to $500 million.

"Are we able to live with $500 million from oil funds?" said Akara. He said the government needed to diversify and look at how to develop other industries such as tourism, agriculture, fisheries and cement. He said revenue could then be clawed back through taxes paid by industry to access infrastructure such as electricity.

The Timorese government has established a petroleum wealth fund to preserve some of its oil funds for the future, although there are fears this will be rapidly depleted once revenues stop flowing.

Member of National Parliament Arao Noe acknowledged the decline in production, but said Timor had nothing to fear as under the law the government could not take more than 3% from the fund per year. "Timor still has enough money, so we should not be shocked by this issue," he said.

He said some revenues from the oil fund had been invested in the Bank of America and after diversifying in 2009 the savings were now earning interest. While the investment continued to deliver a good return, Noe urged the government to ensure the fund was properly managed.

Meanwhile, the Minister of Petroleum and Natural Resources, Alfredo Pires, acknowledged that production had been affected by low oil prices.

However, he said the slow-down may only be temporary and that production could start again once prices start to rise again. "We are still observing the international situation, particularly the change of oil prices, to see if it is permanent or just temporary," said Pires.

Source: http://www.thediliweekly.com/en/news/capital/13684-oil-production-in-kitan-bayu-undan-in-decline