PT Pertamina (Persero) will focus on drilling activities in a number of oil wells to reduce the decline in oil and gas production. Pertamina is optimistic that it can contribute more than 70% to the national production target of 1 million barrels per day (BPD) in 2025.
"Towards Indonesia 1 million barrels, Pertamina gets around 753 thousand barrels or more than 70% of the national target will come from Pertamina," Pertamina President Director Nicke Widyawati said at a gathering with the Media Leaders in Jakarta.
Nicke Widyawati
According to Nicke, drilling was not only carried out on Pertamina's existing field but also on the transition block.
"There are four strategies carried out. If nothing, production decreases. We will increase it by drilling from around 300 to 411, and that will continue to increase. Pertamina's investment is 60% for this, "said Nicke Widyawati.
the Mahakam Block
Nicke explained, in the Mahakam Block, which is a transition block from the old contractor, in the last year before the contract period ended, only 6 wells were drilled, which should have been around 60 wells.
"When it was handed over to Pertamina, it had already been 57% declining rate to be able to hold the declining rate so that our products could increase slightly. We had to drill 122 wells per year. Imagine from previously only 6 wells, "said Nicke Widyawati.
Nicke Widyawati
Nicke revealed the following strategy to increase production was by conducting a seismic survey from off the coast of Bangka in western Indonesia to Papua in eastern Indonesia with a 30 thousand kilometer (km) track. This survey aims to find new reserves because there are 13-17 basins that have oil and gas potential. He said in the next 6 months the results could already be seen.
Another strategy according to Nicke is to increase oil production with the enhanced oil recovery / EOR method. EOR method with water, steam flood, chemical, and surfactant.
Nicke said that the 14 Pertamina EP and PHE working areas had implemented this method. Later the Rokan Block in Riau has the potential to conduct an EOR. It's just that Pertamina can enter the Rokan Block in August next year after the Chevron contract expires.
"Block Rokan is one of the potential ones," said Nicke.
Nicke revealed that activities in the upstream sector were able to increase the production of 1 million BPD as targeted by the government. But he said Pertamina accelerated the increase in national oil production to 1 million BPD.
"Pertamina gets about 70% of the portion of 1 million barrels," She said.
Rokan Block Production
Regarding the Rokan Block, Nicke admitted that he was worried that production levels would decline during the transition period.
"We have made efforts to make the transition period since last year, namely by offering Joint Drilling where drilling activities are carried out together, but with Pertamina funding. But that is not acceptable because as a concession holder it does not want anyone to enter. Legally the concession can be switched to Pertamina in August 2021, "explained Nicke.
In fact, according to Nicke, by regulation, there is a Minister of Energy and Mineral Resources Regulation No. 24 of 2018 which was previously Ministerial Regulation of 26 of 2017 which states that operators, contractors are required to invest in their working areas, and maintain production levels until the end of the contract period.
"So there is actually a contractor's obligation to invest. There is no reason to worry that this will not be replaced because the Ministerial Regulation states that all costs incurred will be replaced because of cost recovery, "said Nicke.
Blogger Agus Purnomo in SKK Migas
The Rokan Block is one of Pertamina's mainstays for increasing production. But in fact, oil production in this block is known to have dropped to 20,000 barrels per day (BPD). The Special Task Force for Upstream Oil and Gas Activities (SKK Migas) has monitored the operational transition process in the Rokan Block. However, SKK Migas stated that the transition process of the Rokan Block was very difficult and had caused a decline in oil production in this block.
PT Chevron Pacific Indonesia (CPI)
According to the Head of SKK Migas Dwi Soetjipto, the lack of drilling investment in the Rokan Block is the main cause of the decline in oil production. The contract period of the PT Chevron Pacific Indonesia (CPI) oil and gas Cooperation Contract (KKKS) in the Rokan Block will end in April 2021.
The Ministry of Energy and Mineral Resources (ESDM) has decided to hand over the management of the Rokan Block after the Chevron contract expires in 2021 to PT Pertamina's State-Owned Oil and Gas Holding Company, and to end the company's partnership with the Indonesian Government which has lasted for more than 90 years.
Meanwhile, Constitutional Economist Defiyan Cori believes, before ending all the provisions contained in the laws and other regulations that apply in Indonesia, especially related to investment drilling must still be carried out by KKKS, namely Chevron.
Chevron
The handover of the management of the Rokan Block to PT Pertamina has also gone through a transparent and professional bidding competition process and Pertamina has issued a signature bonus to the government in the amount of US $ 780 million or Rp10.92 trillion (dollar exchange rate of Rp. 14,000).
Defiyan said that the lack of drilling investment in the Rokan Block by Chevron caused a decrease in oil production of up to 20,000 BPD which meant a reduction in oil supply for domestic needs and would harm Pertamina's position because of the growing oil and gas deficit that President Joko Widodo had complained about if the supply shortages were met through imports.
"With the K3S contract period not yet over, investment in oil drilling until 2021 in the Rokan block must be undertaken by Chevron so that the absence of investment in 2020 does not result in a greater reduction in lifting production to more than 20,000 barrels per day. Chevron can be declared as having committed a default that is detrimental to Pertamina's finances and further disrupts the energy supply for the needs of the Indonesian people, "he stressed.
Therefore, the Rokan Block transition process must be completed by the Ministry of Energy and Mineral Resources and SKK Migas well through the facilitation of both parties (Chevron and Pertamina). Because, if the decline process gets bigger, it will become a problem for the fulfillment of production of Indonesia's oil consumption, in the future.
In fact, in this year's SKK Migas plan, oil production can only reach 705,000 BPD, while in the 2020 APBN, oil production is set at 755,000 BPD.
"It is very irrelevant and makes sense that Pertamina is the party blamed for the decline in Rokan Block production, while the KKKS portion is still at Chevron," he said.
The same thing was stated by an energy observer who is also Director of the Center for Public Policy Studies (Puskepi) Sofyano Zakaria. According to him, the government, in this case, the Ministry of Energy and Mineral Resources and SKK Migas must act decisively to Chevron as the operator of the Rokan Oil and Gas Block.
the Rokan Oil and Gas Block Chevron
"This decline should have been a concern of the government for a long time not just now. The government, in this case, the Ministry of Energy and Mineral Resources and SKK Migas, should understand this problem and must firmly behave towards Chevron which is still responsible for the Rokan block until 2021 "he said.
According to him, according to the regulation namely ESDM Minister Regulation Number 24 of 2018 which is a change from ESDM Ministerial Regulation Number 26 of 2017, it is stated that the contractor is obliged to invest in its working area and maintain the fairness of its production level until the end of the work contract period.
"In addition, it was stated that all investment costs will be replaced by the government (cost recovery). So, actually, there is no reason for Chevron not to invest in drilling because their work contracts are still ongoing until August 8, 2021, "continued Sofyano who is also the Chairperson of the Indonesian Energy Observer Association.
Noted, the production of the Rokan Block has dropped dramatically. In 2012, Rokan Block production was still 338 thousand BPD, and further in 2019, there were only 190 thousand BPD remaining. This is allegedly due to the Well drilling investment by the contractor, Chevron has declined dramatically. If in 2012 drilling was carried out in 615 wells but in 2015 it fell and only drilled 200 wells.
Whereas in 2016 there were 110 wells, and in 2019 there was no drilling for new wells at all. If this year does not invest in drilling wells, the production of the Rokan Block is expected to drop to 160 thousand BPD, and production in 2021, when handed over to Pertamina, is expected to decrease again to 140 thousand BPD.
Upgrading and Building Refineries
Meanwhile, in the downstream sector, Pertamina carried out refinery upgrading and upgrading projects and built new refineries. Refinery upgrading is carried out at the Balongan refinery in West Java, Balikpapan in East Kalimantan, Dumai Refinery in Riau, and Plaju in Palembang, South Sumatra.
While two new refinery projects in Bontang, East Kalimantan and Tuban, East Java refineries with a capacity of 300 thousand BPD each. All of the company's refinery projects are targeted to be completed no later than 2027.
Pertamina Megaprojects Processing and Petrochemical Director Ignatius Tallulembang said, upgrading the new refineries and refineries made the total capacity be 2 million BPD or double the current capacity. The refinery will eventually be able to produce petrochemicals of 12 million tons/year.
"We are the top players in the region. "Our refinery capacity is the largest in the region," he said.
Ignatius revealed, the modernization of refineries made processing capabilities more flexible, meaning that they were able to absorb various types of crude oil. He asserted that in 2025 Pertamina will be able to meet all the needs of fuel oil (BBM) in the country, including producing fuel with the best quality which refers to the Euro 5 standard.
"Fuel production is now around 650 thousand-700 thousand BPD. While consumption of 1.3 million BPD. So we import about 500 thousand-600 thousand BPD. There is no other choice we have to build refineries, "he said.
Meanwhile, based on data from the Central Statistics Agency (BPS), the oil and gas balance deficit in 2019 is US $ 9.34 billion. This deficit is better than in 2018 which reached the US $ 12.69 billion.
Biodiesel Program
In the downstream sector, Pertamina also supports the government's mandatory program related to the mixing of fuel oil (BBM) with FAME (Fatty Acid Methyl Ester) or vegetable oil from palm oil. This program is able to reduce oil imports. This mixing is called biodiesel because it mixes vegetable oil with diesel fuel.
At present 30% Biodiesel (B30) is already underway, which is Solar mixed with 30% FAME. Since 2017 has been mixing with 20% Fame (B20). Nicke Widyawati said the mixing or bioenergy program was dependent on the supply of raw materials for crude palm oil / CPO. The availability of CPO is currently able to support mixing of up to 50% or B50.
"The bioenergy program must look at the current CPO supply count of only B50. It needs additional plantation area (to get to B100), "he said.
He revealed, his party supports efforts to reduce imports of fuel with the biodiesel program 30% (B30) to B-100. Next year the Cilacap Refinery with a capacity of 6,000 barrels per day (BPD) will be able to produce B-100, also known as green diesel products.
"This proves that the Indonesian refinery is capable of B-100 and is the first in the world," he said.
Based on Pertamina's data, in the last five years (2015-2019), the compound annual growth rate (CAGR) of crude oil imports dropped by 9%, while product imports (gasoline, gas oil, aviation fuel) fell 4%. As for LPG imports, increased by 8% to meet the increase in national demand.
Nicke further proposed that the government impose an allocation obligation for the domestic market or Domestic Market Obligation (DMO) for palm oil (CPO) and price limits, such as the DMO imposed by the government on coal for steam power plants. With the DMO scheme, there is a long-term supply guarantee for volume and price.
"The price of output is still regulated using the rupiah and is locked. If it is not regulated (DMO) then there will be subsidies, "he said.
Investor Daily, Page-9, Monday, March 9, 2020
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