The government is trying to entice a local unit of American oil and gas giant Chevron to extend its operations at Rokan block in Riau under the newly introduced gross-split sliding scale scheme to maintain future investment and national oil production.
PT Chevron Pacific Indonesia (CPI) contract will expire in 2021 at the Rokan block, the country’s biggest oil contributor, which had a lifting rate of about 256,000 barrels of oil per day (bopd) last year, 31 percent of the national output. Lifting is industry jargon for domestic ready-to-sell production.
CPl’s contract is one of 23 cooperation contracts that will expire from 2018 to 2021. The government previously stated that it will prioritize state-owned energy firm Pertamina to take over all expired blocks, including eight in 2018, in an effort to strengthen its role as a national oil company.
“We have asked the company [CPI] to extend its contract under the condition that it will have to use' the gross-split scheme,” Djoko Siswanto, the deputy head of procurement control at the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas), said on Wednesday evening.
Under such a scheme, the government will be released from its duty to reimburse contractors for their exploitation costs during the length of their contracts, forcing companies to carry the burden of these costs themselves.
“Now, they are still calculating the economic value of using such a scheme. If they agree, they will send a formal letter [indicating so],” Djoko said, adding that should CPI decide to stay it would be able to maintain the current production level of the maturing Rokan block.
Djoko said he also shares the optimism that CPI would take the govermnenfs offer since it would be more profitable for the company to use the gross-split scheme, which offers a43 percent base split in advance for oil projects, in comparison to the previous cost recovery scheme, in which investors are only entitled to 15 percent of the profits at the end ofthe road.
As stated in the Energf and Mineral Resources Ministry’s decrees No. 8/2017 and No. 26/2017, if a cooperation contract is extended using the gross-split scheme, a contractor will also receive an additional split to make up unrecovered investment costs coming from the old cost recovery scheme.
Yanto Sianipar, senior vice president for policy government and public affairs at Chevron Indonesia, however, refused to comment on this matter as he claimed that he had not heard about the details of the government’s offer. On the other hand, Djoko said, by giving the Rokan block back to CPI, Pertamina would be able to focus on ensuring a smooth transition in the operation of the gas rich Mahakam block in East Kalimantan.
Pertamina, through subsidiary PT Pertamina Hulu Mahakam (PHM), will officially take over all operations at the Mahakam block on Jan. 1, 2018, from French oil and gas corporation Total E&P Indonesie (TEPI), which currently holds a 50 percent stake in the block, while its Japanese partner Inpex controls the other 50 percent.
In order to maintain the continuity and level of oil and gas production of the Mahakam block after the takeover, Pertamina plans to start drilling 15 Wells at the block in the second half of this year with an investment value of at least US$160 million.
This year, the Mahakam block is expected to produce 1.43 billion cubic feet of gas per day and 53,000 bopd.
Meanwhile, Djoko said Pertamina could put all of its efforts into developing eight expired oil and gas blocks given to it next year, namely the Tuban, Ogan Komering, Sanga-Sanga, Southeast Sumatra, North Sumatra Offshore, Tengah, East Kalimantan and Attaka blocks.
Commenting on the mandate, Pertamina upstream director Syamsu Alam said that his company had been conducting a thorough evaluation regarding the cost structure and risks of operating those blocks under the gross-split scheme. The evaluation report would be submitted to the government by the end of this month, he added.
‘After the evaluation process, we can see whether we will need to find partners or go it alone with these blocks and whether we will have to request some changes in the terms and conditions,” Syamsu said.
On the other hand, Djoko claimed that Malaysian state-owned oil company Petronas had shown interest in teaming up with Pertamina to develop the eight expired blocks using the gross-split scheme.
He said Petronas had yet to send an official letter, but its representatives had earlier met with Energy and Mineral Resources Minister Ignasius Jonan and SKKMigas oliicials during their recent visit to Jakarta.
“lt all will depend on its business-to-business approach with Pertamina,” Djoko said.
8 Oil and Gas Blocks submitted to Pertamina
| BLOCK | EXISTING CONTRACTOR | PRODUCTION | |
| 1 | Blok TUBAN | JOB-PERTAMINA PETROCHINA EAST JAVA | 11,500 BPH |
| 2 | Blok Ogan Komering | JOB-PERTAMINA TALISMAN | 3,000 BOPD |
| 3 | Blok Sanga-Sanga | VIRGINIA INDONESIA, Co. | 15,568 BPH and Gas 232,5 MMSCFD |
| 4 | Blok Coutheast Sumatera | CNOOC Ses Ltd. | 31,958 BPH and Gas 132,9 MMSCFD |
| 5 | B Block | Exxon Mobil Oil Indonesia Inc. | 3,400 MMSCFD |
| 6 | Blok NSO/NSO Ext | Exxon Mobil Oil Indonesia Inc. | 400 MMSCFD |
| 7 | Blok Tengah | Total & EP Indonesie | (Exploration) |
| 8 | Blok East Kalimantan | Chevron Indonesia Company | 24,000 BPH and Gas 60 MMSCFD |
| JOB= JOINT OPERATING BODY |
Jakarta Post, Page-13, Friday, June 9, 2017
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