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Friday, March 27, 2020

THE COMPLEXION OF OIL AND GAS BLOCK TRANSITIONS



The process of transition in the management of oil and gas working areas that will end their contract period does not always take place smoothly despite the rules. In the Regulation of the Minister of Energy and Mineral Resources No. 15, 2015 it is stated that the management of terminated working areas (WK) can be done in various ways, namely management by PT Pertamina (Persero), the extension of the contract of cooperation by the contractor, and joint management between Pertamina and contractor.

Of the various constraints that exist, the issue of the mechanism of returning investment costs in upstream oil and gas business activities is one that makes the transition process complicated.

the East Kalimantan Block

In fact, the mechanism for returning investment costs is already regulated in ESDM Minister Regulation No. 26/2017. For example, the return on investment costs in the East Kalimantan Block and the Sanga Sanga Block. 

the Sanga Sanga Block

    Both of these working areas were jointly taken over by Pertamina. The Sanga Sanga Block began to be managed by Pertamina on 7 August 2018 from Vico Indonesia, while the East Kalimantan Block was officially managed by Pertamina on 25 October 2018.

According to Pertamina Upstream Director Dharmawan Samsu, repayments for investment costs continue to be coordinated with relevant parties. It is expected to be carried out immediately while still observing governance principles in accordance with applicable regulations, "he said.

However, the process of calculating the return on investment costs, according to Deputy Head of the Special Task Force for Upstream Oil and Gas Business Activities Fatar Yani Abdurrahman, could not be rushed.

"We are still verifying the unrecovered cost of the East Kalimantan and Sanga Sanga Blocks. This long verification process is being calculated. It is better for us to study late rather than in a hurry the results are not appropriate, "he said.

RECEPTION OPTIMIZATION

When talking about the Regulation of the Minister of Energy and Mineral Resources number 26 of 2017, this regulation is presented considering efforts to maintain the fairness of production levels and optimization of state revenues from upstream oil and gas activities. This legacy regulation of Ignasius Jonan and Arcandra Tahar has been amended three times.

This ministerial regulation was first published on March 30, 2017. Not long ago, the Minister of Energy and Mineral Resources Regulation No. 47 of 2017 was issued on August 3, 2017. After 7 months, another Minister of Energy and Mineral Resources Regulation No. 24 of 2018 was published. 

   Finally, re-changes took place on November 16, 2018, with the birth of the Minister of Energy and Mineral Resources Regulation No. 46 of 2018 concerning the third amendment to the Minister of Energy and Mineral Resources Regulation No. 26 of 2017. Fatar acknowledged the regulation continues to be refined.

"The Ministerial Regulation was made to ensure the return of investments that have not yet returned capital. Therefore, if you want to enter into an operator like Pertamina, they have read the intent and purpose. "

That is, the cooperation contract contractor (KKKS) who dares to manage oil and gas blocks must be able to reimburse investment costs. Oil and gas practitioner Tumbur Parlindungan said that as investors, KKKS do not want to be treated differently. Therefore, the government should ideally be firm and consistent with established rules.

According to him, the lack of implementation of the return on investment costs by the new KKKS to the old manager, could be the cause of PT Chevron Pacific Indonesia (CPI) refusing to drill during the Rokan Block transition. Tumbur said that Chevron could have been waiting for the realization of the unrecovered costs in East Kalimantan or Sanga Sanga.

Meanwhile, founder of the Reforminer Institute Pri Agung Rakhmanto said that regulations issued by the government related to the transition were in fact not easy to implement.

"In fact, it can be said it will more often not be applied because each party will ultimately refer to the existing contract clause."

Chevron

Unfortunately, the Chevron was reluctant to comment further. Chevron's Corporate Communication Manager Sonitha Poernomo confirmed a number of things being discussed so far, including the option to optimize production from this strategic asset. 

Sonitha Poernomo

    From the information gathered, the transition process at the technical level has actually been going well.

the Rokan Block by Chevron

Likewise, it is also related to the option to buy Rokan Block shares or Pertamina's scheme to enter the Rokan Block before next year. The business also tried to confirm to Pertamina's President Commissioner. Pertamina's Chief Commissioner Basuki Tjahaja Purnama was reluctant to explain more about the decision to buy Chevron's shares or early handovers in the Rokan Block.

Basuki Tjahaja Purnama

"It's clear the decision of the BOD and BOC meeting. Let the directors answer, "he said.

Bisnis Indonesia, Page-9, Friday, March 20, 2020

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