Publications

The Indonesian oil and gas industry faces many challenges in improving production-related operational efficiencies. The inefficiencies identified are primarily associated with a lack of regional and national planning among operators, under-utilization of facilities, redundancy efforts, a lack of shared information and little or no measurement of performance. This situation has caused the average operating cost per barrel to be higher in Indonesia than in other countries in the region.Based on BPMIGAS report 2002-2004 (www.bpmigas.com), total expenses in 2004 approximately US$ 7 billion to explore and produce 840 million BOE, or US$8.06/BOE. Although just a US$1/BOE reduction in total costs would result in saving nearly US$ 1 billion annually, it is suggested here that a committed application of optimization alternatives could achieve an annual savings of up to US$ 2 billion for the industry.Although Indonesia has raised the KRIS (Cost Reduction Indonesian Style) initiative, no recommendations have been implemented. Similar initiatives in the United Kingdom (CRINE or Cost Reduction in the New Era) and in Malaysia (CORAL or Cost Reduction Alliance) have become major successes following collaborative planning among the participating stakeholders and the elimination of wastage and reduction of risk following effective utilization of shared facilities and resources.Shared facilities, which are designed and developed at designated locations, are referred to as SUPPLY CHAIN HUBs (SCH). A SCH will facilitate both operators and suppliers in optimizing and creating value for their operations. However, to accomplish this, a significant change in mindset is required in all participants.