If we talk about the development of a gas field, there are three main factors that must be met, namely gas sources, gas buyers and gas prices. If one of them is not fulfilled, then don't expect a gas field to be developed immediately.
If the gas source already exists, then after that find a buyer with the agreed gas price. The physical properties and chemical composition of the gas, which is reflected by the caloric content (in British thermal units - BTU), is one element in gas price negotiations.
Another element is the costs of upstream activities, which include exploration and exploitation activities. This cost is also related to how much gas reserves can be obtained. This last thing will determine how much gas capacity will be supplied and how long the contract is agreed upon. The certainty of supply volume (with certain physical properties and chemical composition) and the length of the contract are then negotiated and determine the price of gas.
In the case of the Masela field in the Abadi Block, the main problem is not the mere onshore or offshore issue, but is there a gas buyer who will contract for decades, who will commercially guarantee the return on investment and the profits he will get?
For this reason, it is only natural for the KKKS to manage the Masela field, Interpex and Shell to consider which option is the most economical so that the gas can be commercially utilized (there are buyers).
On the other hand, potential gas buyers will clearly negotiate very actively to obtain a reasonable gas price, the desired volume and the duration of the contract, as well as the certainty of supply.
Even if the government has other intentions, namely to increase the added value of gas exploitation in this block, for example, for fertilizer plants, petrochemicals, etc., the best way is to discuss it with upstream-downstream concepts such as the development of gas fields in the Donggi-Senoro Block (known as the DSLNG project).
In the DSLNG project, the Senoro-Toili gas field, developed by Pertamina-Medco JOB, and the Donggi and Matindok gas fields operated by Pertamina EP, were developed jointly with the upstream concept, which follows the 'cost recovery term' based on the KKKS general rules.
Because the reserves are not so large, the concept of combining products from the three gas fields was developed by scheduling operations that are arranged in such a way as to meet their capacity to be liquefied natural gas and part of it for fertilizer plant raw materials.
The processing of gas into LNG is also due to gas buyers not around the gas source (in Central Sulawesi). At the time of development, there was no infrastructure or direct gas buyers there. So the concept made is partly used as LNG and partly as raw material (feedstock) for fertilizer plants that will be built later.
The LNG project is funded mostly from LNG buyers' funds. This project is very marginal in terms of profit because the estimated large reserves will only be able to supply the LNG plant and fertilizer plant around 13 years since the first gas was released (2014). Not to mention talking about the economic calculations carried out at the time, when oil prices were still above US $ 100 / barrel.
With the current low oil price, which is full of uncertainties in estimating it going forward, the author believes it will be more complicated to calculate the economic and commercial factors of a gas field development project. Especially for new fields that are difficult to the location (offshore) and far away and buyers, such as the Masela field.
If the Masela field will be developed with the upstream-downstream concept, then the development plan must be comprehensively redesigned. KKKS which now owns the block will carry out upstream activities, ranging from drilling, production to gas purification. This activity can be carried out by building 'ships,' FPSOs (floating production storage and offloading) with capacities and costs designed to be more effective and efficient, so that they can sell clean gas at a profitable margin at a 'delivery point' (custody meter) above the FPSO.
This FPSO is also equipped with gas compression facilities to make CNG (compressed natural gas) provide flexibility for buyers to choose. Then they invite buyers to take the gas at the delivery point at the price of FOB (free onboard). Thus it will minimize government costs that must be incurred by the government through a cost recovery mechanism.
This is what is called the transfer of Capex (capital expenditures) into Opex (operating expenditures) which in today's business is a trend so that business can take place by dividing the risk of benefits (profits).
Nothing is difficult if done together and mutually beneficial. For buyers who are able to invest, maybe he will build his own pipeline to the nearest island to then be used as raw material or fuel for his industry (fertilizer, petrochemical, ceramics, etc.) or onshore LNG for export.
Or for other buyers, they might buy CNG to be taken by ship to smelters, power plants, fertilizer plants, petrochemicals, etc. which are some distance away from Masela Field. Or for overseas buyers, they can buy CNG and then take it to a domestic LNG plant (DSLNG, Tangguh LNG, or Badak LNG) to be turned into LNG and brought to their country.
At the same time can utilize state assets that are not used (idle). This is only a commercial aspect calculation that determines how much profit and certainty (energy security) that buyers will get for the business they are doing in anticipation of the gas era in the future.
the Masela field
The government can ask a consortium of national energy companies (Pertamina, PGN, and PLN) and the national private sector to play a role in the downstream sector.
With this upstream-downstream concept, it is expected to have a double effect in various sectors. example: the developer (KKKS) of the Masela field can accelerate the return on investment already spent; reduce the cost recovery that must be paid by the government; the government can immediately benefit from the gas found; achievement of added value of gas for domestic and export needs; the buyer can choose the option that is suitable with the economic and commercial aspects; gas infrastructure development will adjust to the petrochemical and shipping industry (maritime) which will develop rapidly; the use of Indonesian workers will be maximized, and the movement of economic activities and the fulfillment of the welfare of the surrounding communities also increased.
Bisnis Indonesia, Page-2, Tuesday, Oct 18, 2016
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