East Natuna Block: Immediately Begins Or Continues Abandoned

The East Natuna Block was discovered in 1973 an Italian oil company, ENI, which has not been explored until now. 

    In fact, the development plan has begun since three decades ago, when the oil and gas block was still named Natuna D-Alpha by PT Pertamina (Persero) and ExxonMobil.

Natuna D-Alpha or East Natuna Block

     High levels of carbon dioxide (C02) in the block stopped the plan, until finally in 1995 the government re-signed a contract with ExxonMobil to develop it. However, the contract was again terminated in 2007, and a year after East Natuna was fully handed over to Pertamina.

The name change of Natuna D-Alpha to East Natuna was carried out in 2010, when Pertamina signed a cooperation agreement with ExxonMobil. Then in 2011, Pertamina built a consortium by involving ExxonMobil again, and embracing Total EP Indonesia and PTT EP Thailand.

Until now, the development of the East Natuna Block has not been so progressive. 

Luhut Binsar Pandjaitan

     Luhut Binsar Pandjaitan, Acting Minister of Energy and Mineral Resources said the signing of the production contract or Production Sharing Contract (PSC) could not be done in the near future. The signing was hampered by the revenue sharing scheme that had not been agreed upon.

Wianda Pusponegoro

Wianda Pusponegoro, Vice President of Corporate Communications of Pertamina, said that his party was not really concerned about the profit-sharing scheme that would later be applied in the East Natuna Block. Pertamina only wants to develop the project optimally. The government has actually prepared a draft PSC that is expected to make the East Natuna Block development project economical.

For the development of oil, the government offers a profit-sharing with a share of 60:40, which is 60% for the government and the remaining 40% belongs to the contractor. Gas development in the block will be carried out with a profit-sharing scheme of 55:45, which also examines the preparations needed to explore the area, including the facilities needed, and how much the investment costs.

The consortium still has until next year to express its attitude regarding the development of the East Natuna Block. Pertamina Upstream Director Syamsu Alam explained that oil production in the East Natuna Block could be carried out faster than gas. 

    Oil development does not need to ascertain who is the buyer and the method of transportation such as in the gas business. Gas development takes a very long time because Pertamina must ensure that it reaches the commercial stage of 55% for the government and 45% for the contractor.

The government will only benefit from the taxes paid on activities in the block. Wianda said the consortium was still reviewing all aspects of developing the East Natuna Block. Difficult terrain and remote locations become considerations that must be really thought by the consortium before starting its activities. Not to mention the gas reserves which are said to reach 222 TCF are dominated by CO2, and it is estimated that only 46 TCF can be produced.

In the study, the consortium also calculated the structure of oil and gas contained in the East Natuna Block. From there it will be determined whether the oil or gas that will be developed must first sign the East Natuna Block PSC before the oil development is carried out. Pertamina and partners still have to complete the concept of developing the East Natuna Block to the commercial stage.

President Joko Widodo

President Joko Widodo (Jokowi) actually wants the development of the East Natuna Block to be accelerated. The lack of activities in the eastern Natuna region makes the region vulnerable to seizure by other countries. Moreover, East Natuna has relatively large gas reserves compared to other oil and gas blocks in Indonesia.

The government estimates that the development of the East Natuna Block will trigger the development of other nearby oil and gas blocks, such as the Northeast Natuna Block, the Tuna Block, the Sokang Block, the South Sokang Block, the North Sokang Block, and the East Sokang Block.

I Gusti Wiratmaja Puja, Director General of Oil and Gas at the Ministry of Energy and Mineral Resources, said the development of oil and gas in the East Natuna Block will use a contract model. The contract that will be used later is not a special contract. The absence of legal provisions to accelerate oil development activities in the East Natuna Block is an obstacle.

If the contract is separated, the development of petroleum that is carried out is feared to damage the gas structure that requires space to carry out carbon dioxide injection. The Ministry of Energy and Mineral Resources also hopes that the next year 2017 there will be an oil structure survey activity in the East Natuna Block. Because in 2017 the technology and market study of oil and gas products from the block will be completed.

Pri Agung Rakhmanto, the energy observer at the Reforminer Institute, views that the government and the KKKS are not ready to develop the East Natuna Block. This can be seen from the absence of a definite scheme in the development of the Block.

Bisnis Indonesia, Page-10, Thursday, October 13,  2016