Government Seriousness Awaited

The government has decided to take over management of the Rokan Working Area in Riau Province, after 50 Years of being controlled by PT Chevron Pacific Indonesia.

PT Chevron Pacific Indonesia

The government also appointed PT Pertamina (Persero) to become the new contractor in the giant oil and gas block starting on 9 August 2021. The decision was taken on the basis of business and economic considerations after evaluating Pertamina's proposal submission. Unfortunately, the transition process and Chevron to Pertamina are still hampered.

Facilities echoed by the government through the Ministry of Energy and Mineral Resources (ESDM) and SKK Migas were, in fact, unable to smooth Pertamina's steps. In the cooperation contract or the transition to managing the Rokan Block, there is indeed no policy that regulates a smooth transition process. On the side other, every contractor of a cooperation contract (KKKS) certainly only refers to the contract.

The Rokan Block

The Rokan Block Working Area management contract by Chevron will end on August 8, 2021. In accordance with the results of the tender, the management will be carried out by Pertamina, effective from August 9, 2021, for the next 20 years, with a gross split scheme.

Chevron last drilled 91 wells in 2018. In 2019-2021, the company will no longer drill Rokan. This is considered reasonable, considering that the US oil and gas company would leave the legendary oil and gas block.

However, the impact of production decreased dramatically. After that, Pertamina offered alternative investment activities during the transition period, namely the Joint Drilling Agreement (options 1, 2, and 3 JDA). The JDA option is one of the options offered by Pertamina, in which Chevron drills during the transition period at Pertamina's expense.

Chevron

However, the option was rejected by Chevron because it was considered not in accordance with the economy. If so, Chevron has its own standards in drilling activities, while Pertamina also has its own counts. 

Nicke Widyawati

   Pertamina's President Director Nicke Widyawati expressed his concern, given the deadline for the transfer of management of the Rokan Block that is getting closer.

"We have offered joint drilling. So, we did the drilling with funding from Pertamina. However, that effort cannot be accepted, because as a concessionaire, he certainly does not want anyone to enter, "said Nicke.

Pertamina considers Chevron's policy not to issue new investments during a transition period that is unwarranted. If referring to the Minister of Energy and Mineral Resources Regulation No. 24 of 2018 concerning the Mechanism of Returning Investment Costs in Upstream Oil and Gas Business Activities, the operator is obliged to invest in his Work Area and maintain the level of production until the end of the contract period.

The regulation issued on April 20, 2018 is the second revision of Ministerial Regulation Number 26 of 2017. It's just that, in Article 8 of the Minister of Energy and Mineral Resources Regulation No. 24 of 2018 it is explained that in the non-renewed cooperation contract, the contractor is required to settle the investment cost return . Obligations to settle the value of the return on investment costs included in the letter of determination of management of the new work area and new cooperation contract.

Drilling Certainty

With the rejection of the JDA Option by Chevron, Pertamina's Upstream Director Dharmawan H. Samsu assesses that the possibility of his fate will not be much different from the Mahakam Block. Moreover, Pertamina has not been able to ascertain whether drilling can be carried out this year or not.

"We are still talking about it and of course I cannot put the government first. Of course, the government is also trying to be able to do drilling, but the most important thing is to ensure that when the transfer is managed the drilling team is ready to go to the field. So there is no delay, "he said.

Sonitha Poernomo

When confirmed, Chevron's Corporate Communication Manager Sonitha Poernomo confirmed a number of things were being discussed, including the option to optimize production from this strategic asset.

"However, according to company policy, we cannot provide this information in detail," She said.

SKK Migas Deputy for Operations Julius Wiratno instead asked Chevron to drill in the Rokan Block, later with a cost recovery scheme.

"We will try to conduct drilling as soon as possible to support the achievement of production or lifting targets," he said

Teaching Staff of the Faculty of Earth Technology and Energy, Trisakti University, Pri Agung Rachmanto, said there was no party to be blamed in the transition process that was not smooth. He considered the JDA option offered by Pertamina would be difficult to achieve because the existing production sharing contract (PSC) does not regulate the smooth transition process.

According to. he, both parties must refer to the existing contract, so it would be natural if no agreement was found.

"The decline in production, due to a decline in investment and a smooth transition, may instead be said to be an inevitable consequence," he said

The founder of the Reforminer Institute highlights the regulations issued by the government regarding the transition period and the termination of oil and gas blocks. In practice, the policy is not easy to implement because each party refers to the existing contact clause.

"When the Ministerial Regulation is tried to be applied with the B to B approach, it will not necessarily take place unless the B to B agreement is reached," he explained.

With these conditions, it should be questioned again the seriousness of the government to take over management of the Rokan Block. The most important thing is whether the government is willing if the scheme also offers yields and investment opportunities for other portfolios. If there is an agreement there, it is possible that the Rokan Block transition process will run smoothly.

Bisnis Indonesia, Page-23, Wednesday, March 11, 2020