Indonesia believes it is time for it to revive its upstream oil and gas sector this year in the backdrop of recovering global crude prices.
Investment in the upstream oil and gas sector plunged from an annual figure of US$19.34 billion in 2013 to $9.33 billion in 2017, or 75.9 percent of the original target stated in last year’s revised state budget, according to the Upstream Oil and Gas Regulatory Special Task Force (SKK-Migas).
Investment for exploration activities also fell from $1.87 billion in 2013 to a mere $180 million last year, despite Indonesia’s urgent need to boost its petroleum reserves. Ofiicial data shows that the amount of proven crude oil reserves in the country dropped to 3.3 billion barrels at the end of 2016 from 3.69 billion in 2013.
SKK Migas deputy head Sukandar said such a situation was driven by a significant drop in global crude prices in recent years, which, eventually forced contractors to halt their investment.
“But now, as global crude prices have started to recover, we believe investors will spend more money for upstream activities,” he told a press conference on Friday.
The price of global benchmark Brent crude reached last year’s peak of $67.02 per barrel on Dec. 26, after falling to $ 44.82 per barrel on June 21. The price even hovered at around $68 per barrel on Friday. With the current crude prices, Sukandar said upstream contractors Would be able to gain an internal rate of return (IRR) of around 20-percent, which he said would be more than enough to attract investors.
SKK Migas is upbeat to see investment in the upstream oil and gas sector reached $12.6 billion this year, $810 million of which is projected to come from exploration, while the remainder will be from exploitation.
This year, the task force aims to see contractors conduct 103 exploratory drillings, 2D seismic surveys covering 1,759 kilometers and 3D seismic surveys covering 356 square kilometers at various exploration working areas.
It also expects contractors to drill 175 development wells as well as undertake 2D and 3D seismic surveys covering 3,150 km and 3,011 sq km at various exploitation working areas.
“Besides, we put high hopes on the government's efforts to offer a number oil and gas working areas through auction,” SKK Migas head Amien Sunaryadi said. “We will be able to boost exploration activities if there are new contractors that really have the financial capability to do so.”
The Energy and Mineral Resources Ministry has recently found bidders for five of 15 oil and gas working areas offered through last year’s auction. Among the bidders are the United Arab Emirates-based Mubadala Petroleum, Spain’s Repsol Exploracion SA and a consortium consisting of the United Kingdom-based Premier Oil Far East, Mubadala Petroleum and Singapore’s Kris Energy.
The ministry is set to announce the name of the tender winners in February and sign contracts with them in March. The ministry will also open another tender process in January for 22 oil and gas blocks that failed to attract investors at auctions in 2015 and 2016, as well as for 11 other new blocks.
“We are still evaluating which blocks will be put up for auction as we will only offer blocks with good quality seismic data,” said the ministry’s secretary-general, Ego Syahrial.
SKK Migas also plans to see seven upstream oil and gas blocks go on stream in 2018 with an estimated peak production rate of 7,500 barrels of oil per day (bopd) and 145 million standard cubic feet per day (mmscfd) of gas. Among the operators of those blocks are subsidiaries of energy firms PT Medco Energi Internasional and Pertamina.
Throughout last year, 14 new upstream projects were on stream with peak production rates of 21,280 bopd and 1,193.7 mmscfd of gas.
“We have also received three plans of development [PODS] for gas projects with combined reserves of around 3.5 trillion cubic feet,” Sukandar said.
The PODs are for the Marakes Field operated by Italy-based Eni in East Kalimantan, the Asap, Kido and Merah fields operated by Malaysia’s Genting Oil in West Papua as well as the Senoro-Tolili field jointly operated by Pertamina and Medco in Central Sulawesi.
“Output from these fields will be a significant contribution to national gas production,” Sukandar said.
The country’s gas lifting the colloquial term for ready-to-sell production - stood at 1.14 million barrels of oil equivalent per day (boepd) in 2017, slightly below the original target of 1.15 million boepd.
Meanwhile, oil lifting reached 803,847 bopd last year, also below the target of 815,000 bopd. Indonesia was still able to record $13.14 billion in state revenues from the upstream oil and gas sector last year, surpassing the target of $12.2 billion, thanks to the surging crude prices.
At the same time, cost recovery claims from upstream contractors amounted to $11.32 billion, surpassing the target of $10.71 billion. The biggest claim came from production costs worth 85.3 billion, followed by a depreciation component of $3.27 billion, which comprises claims from previous expenditures made by contractors before their fields came on stream.
“Indeed, the increasing crude prices have led to bigger state revenues. But on the other hand, such a situation has also allowed contractors to include some costs that were previously unrecovered in their claims, as stipulated in our contracts with them,” Amien said.
Jakarta Post, Page-13, Saturday 6, 2018
No comments:
Post a Comment