Jakarta, Oct 29 (Antara) - State-owned oil and gas company Pertamina will invest in the Mahakam Block in 2017, one year before it officially takes over management of the country's major gas field from PT Total E&P Indonesie.
Officially, Pertamina will take over in January 2018, after the contract of PT Total E&P Indonesie, which has operated the gas field for 50 years, ends on December 31, 2017.
By investing earlier in the gas field, Pertamina hopes to prevent a decline in gas production when it takes over the operation. For this purpose, the government has agreed to the amendment of the Production Sharing Contract (PSC) with Total E&P Indonesie.
Minister of Energy and Mineral Resources (ESDM) Ignasius Jonan hoped that the amendment of the PSC would have positive impact on the continuation of the Mahakam Block production. Up to the first semester of this year, the Mahakam Block's gas production was recorded at 1,747 million metric standard cubic feet per day (MMSCFD) and oil production of 69,186 barrels per day (bpd).
"President Joko Widodo provided directives that matters relating to the management transition should be prepared and completed as soon as possible. With the amendment of the PSC, Pertamina is now able to invest in the Mahakam Block during the transitional period. Later, this investment could be recognized by the Upstream Oil and Gas Operator (SKK Migas) as cost recovery," Minister Jonan said Tuesday.
The amendment of the PSC provides the legal basis and legal certainty for activities during the transitional operation of the Mahakam Working Area (WK), according to Jonan.
With the amendment, the continuation of oil and gas production could be maintained, while providing legal certainty for the activities during the Transitional Operation of Mahakam Area from the outgoing contractors to Pertamina.
The amendment includes oil and gas operational activities by outgoing contractors but financing by Pertamina until the new contract takes effect from January 1, 2018. The financial costs of the operation spent by Pertamina will be refunded.
Pertamina, in this case its subsidiary PT Pertamina Hulu Mahakam (PHM), and the SKK Migas had signed a PSC on December 29, 2015, that will take effect from January 1, 2018.
Pertamina is well ahead in its preparations to take over the operation of the Mahakam Block, Syamsu Alam, Pertamina upstream director, said.
Following the government's decision and the signing of PSC Mahakam amendment, Pertamina has since the end of 2015 focused on carrying out transitional management process by arranging a team of personnel from the Upstream Oil and Gas Regulator (SKK Migas) and Total E&P Indonesie.
"To avoid a sharp decline in production in 2018, Pertamina decided to begin investment in 2017. It included a drilling program of 19 wells in 2017, with Total as the operator to carry out the program," Syamsu said.
In the drilling of 19 wells in 2017, Pertamina was predicted to invest some US$180 million. It hopes that by 2018-2019, the WK Mahakam's gas production could be maintained at 1.2 billion standard cubic feet per day (BSCFD) and oil production at 20,000 barrels of oil per day (BOPD).
The wells to be drilled next year will start production in 2018. This is one of the steps to prevent production decline, according to Syamsu.
In general, the decline in production in Mahakam Block could be prevented by increasing the number of wells.
In the meantime, an observer has expressed confidence that Pertamina would be able to increase Mahakam Block's gas production. "By investing earlier in the gas block, Pertamina will be able to prevent the decline in production," Dirgo Purbo, who is also a Geo-economic lecturer at the National Resilience Institute (Lemhanas), said in Jakarta Friday.
Pertamina, as the operator of the block after 2017, could guarantee that its production would meet the demand for gas at home.
The entry of Pertamina to the block will certainly result in better maintenance programs as well as additional drilling activities. This will automatically increase the production volumes of reservoir zones that have not yet been tapped, according to Dirgo.
The gas block is very important for increasing national gas production to meet the domestic needs. As an operator, Pertamina also has a strategic role in regulating its production to meet domestic demands.
"Pertamina will certainly give priority to the needs at home," Dirgo said, adding that Pertamina needs to be supported in developing the Mahakam Block. The most important support is providing it with full authority to manage it based on corporate principles, as practiced by multinational oil and gas industries.
Through the PHM, the government has officially provided the green signal for Pertamina to make early investment in the Mahakam Block.
Total E&P Indonesie had been managing the Mahakam Block contract since 1967. In 1997, it was extended for another 20 years, until 2017. Total E&P Indonesie has been partnering with Japan's Inpex Corporation for exploring the Mahakam oil and gas field.
The Mahakam oil and gas block in East Kalimantan still has large oil and gas reserves, according to geologist Rovicky Dwi Putrohari.
"As a geologist, I see that oil and gas reserves in the Mahakam block are still large. It still holds a large 'upside potential,' or resembles a field that has yet to be exploited," he explained. ***3***(A014/INE)EDITED BY INE/H-YH (T.A014/A/BESSR/A/Yosep) 29-10-2016 17:36: |
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