While state-owned oil and gas firm Pertamina may be moving a few steps forward on some large projects, it has to maintain a wait and see stance on several others, due to a stream of new regulations issued by the government.
Since Jan. 18, PT Pertamina Hulu Energi (PHE) has been operating the Offshore Northwest Java (ONWJ) oil and gas field under the gross-split scheme in a follow-up contract for a 20-year period. Furthermore, the government has mandated the Pertamina subsidiary to take over eight other fields under the newly implemented scheme, after the contracts for those fields had been terminated. However, Pertamina wants to hold off the signing of the remaining production sharing contracts (PSCS) to first review the operations and costs of the ONWJ field.
PHE president director R. Gunung Sardjono Hadi said the firm had conducted several simulations to see if it was feasible to operate the fields under the new scheme but with a similar net present value to the previous one.
“It’s safe to say that the past three to four months have not been enough to clearly conclude that there are significant differences,” he said on the sidelines of the 41” Indonesian Petroleum Association exhibition and convention on Wednesday.
While the company had conducted some simulations, Hadi further explained, it would need to go through a whole year of operation for a proper review. ‘At the end of the day, we will be able to properly compare the cost recovery and gross-split schemes,” he said.
The new PSC scheme was introduced earlier this year, with the government hoping it will eventually phase out the current PSC system, which reimburses contractors for exploration and exploitation expenses through what is dubbed “cost recovery.” Under the new gross-split scheme, the profit split between the government and contractors will differ depending on several variables, including global oil prices and the stage of production.
While the government has touted the new scheme as a win-win solution for all stakeholders, especially in terms of efficiency, many are unsure. Even PHE has officially filed complaints with the government, saying the scheme was too costly for ONWJ, especially since it did not include exploration in the calculation of costs.
The scheme also contained ambiguity over the fate of unrecovered costs carried over from previous contracts. Responding to this, the government has agreed to grant PHE an undisclosed higher profit share and issued a new ministerial decree on unrecovered costs. The new decree stipulates that if a contractor decides to extend a contract under the gross-split scheme, the unrecovered costs of the previous PSC will be included in the profit split.
Pertamina upstream director Syamsu Alam confirmed that the company was in no rush to sign the new contracts, as there was still a lack of clarity on several issues. While the fate of the eight new contracts remain unclear, Pertamina seems to be making better strides in the Mahakam field, which it will officially take over from French oil and gas giant Total E&P Indonesie
(TEPI) and Japan’s Inpex.
Syamsu confirmed that its subsidiary PT Pertamina Hulu Mahakam (PHM) would drill 14 wells next month to prevent a drop in production that typically occurs during the transition period. “We will invest around US$160 million,” he said.
TEPI expects to generate 1,430 million standard cubic feet of gas per day (mmscfd) and 53,000 barrels of oil per day (bopd) from the Mahakam block this year. Pertamina, on the other hand, aims to produce a total of 690,000 barrels of oil equivalent (boe) by the end of this year, up from 650,000 boe last year.
Jakarta Post, Page-15, Thursday, May 18, 2017
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