The government’s ambition to conclude a technology and market review for the gas-rich East Natuna block may have hit a snag with a member of the current consortium deciding to step out of the negotiations.
The consortium is led by state owned oil and gas giant Pertamina, with Thailand’s oil and gas exploration and production firm PTTEP and the local unit of United States oil and gas firm Exxork Mobil as the members.
However, the latter has sent a letter to the Energy and Mineral Resources Ministry confirming its decision to bow out of the on going negotiations. The ministry’s oil and gas director general IGN Wiratmaja Puja confirmed that ExxonMobil Indonesia had stated that based on its previous studies, it was economically unfeasible to develop the East Natuna block under the current terms and conditions.
However, ExxonMobil had also stated it was ready to assist the Indonesian government as the firm had the technology and technical skills needed, Wiratmaja said.
“ExxonMobil claims that the block has already exceeded its expiration date and also that it is economically unfeasible under the current terms,” he told reporters on Tuesday
ExxonMobil’s previous studies concluded that with the block’s characteristics, the contractors would have to sell the block’s gas at between US$10 and $15 per million British thermal unit (mmbtu), whereas the government is currently trying to cut gas prices down to $ 6 per million British thermal unit (mmbtu).
ExxonMobil Indonesia’s vice president for public and government affairs, Erwin Maryoto, confirmed that it wished to leave the consortium, but it expressed its commitment to continue seeking and evaluating new opportunities in Indonesia.
“Having completed the technology and market review and evaluated the results, ExxonMobil no longer wishes to continue further discussions or activities involving the East Natuna area,” he said in a statement obtained by The Jakarta Post.
ExxonMobil’s exit followed in the footsteps of two other former consortium members Malaysia’s Petronas and France’s Total. First discovered in the 1970s, the East Natuna block - formerly known as D-Alpha - is located in Riau Islands. With total proven reserves of 46 trillion cubic feet (tcf) of gas, it is considered to have one of Asia’s largest reserves.
However, the field has a high carbon dioxide (CO2) level of 72 percent, the highest of all exploitation fields globally, which necessitates advanced technologf to maximize extraction. The process is estimated to require between $20 billion and $40 billion.
Previously, a government-commissioned study showed that East Natuna would only be economically feasible if future contractors obtained 100 percent of the profits, leaving the government only to reap revenues from taxes.
However, the calculation was based on the assumption that the block would operate under the government’s reimbursement scheme, known as cost recovery. The block is characterized as a marginal field for several reasons, such as a drop in global oil prices, a lack of proper technologf in the area, its remote location and a lack of supporting research. However, Pertamina does not seem rufiied by ExxonMobil’s exit.
The firm’s upstream director Syamsu Alam acknowledged that it would be impossible for Pertamina to develop the gas block on its own because of its marginal properties, but added that “there are already several IOC [international oil companies] that have expressed interest in developing that block.”
Jakarta Post, Page-13, Wednesday, July 19, 2017
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