The upstream oil and gas industry received good news from the extension of the Tangguh cooperation contract for 20 years because it presents an additional investment commitment of up to US$4.6 billion.
The extension of the Cooperation Contract (PSC) for the Tangguh block allows BP and its partners to develop the Tangguh Liquefied Natural Gas (LNG) project until 2055. The Tangguh PSC area itself includes Wiriagar, Berau, and Muturi in Bintuni Bay, West Papua.
In the Tangguh LNG Project, BP acts as the operator with a 40.22% ownership stake. Then MI Berau BV 16.3%, CNOOC Muturi Ltd. 13.90%, Nippon Oil Exploration (Berau) Ltd. 12.23%, KG Berau Petroleum Ltd. 8.56%, KG Wiriagar Petroleum Ltd. 1.44%, and Indonesia Natural Gas Resources Muturi Inc. 7.35%.
Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif asked BP to immediately complete the Tangguh Train 3 Project, which is one of the national strategic projects in the upstream oil and gas sector. Because natural gas is considered a commodity that has an important role in the energy transition period towards net zero emission in 2060.
The extension of the Tangguh Cooperation Contract (PSC) also makes the availability of LNG to meet domestic and export needs more secure.
Arifin Tasrif said we believe that gas will have an important role in achieving this target. Indonesia has great potential to produce gas in the future, therefore the government asks contractors to work together and develop the resources," said Arifin Tasrif.
According to him, the government will support all efforts made by Cooperation Contract Contractors (KKKS) to optimize domestic resources. This also makes the government more open to cooperation in the management of upstream oil and gas in the country. For information, the Tangguh Train 3 Project is projected to be able to go onstream in the first quarter of next year.
The target is that the project will produce 700 million standard cubic feet per day (MMSCFD) of gas and 3,000 barrels of condensate per day.
The investment required for the Tangguh Train 3 Project is estimated at US$8.9 billion. The Tangguh LNG project started in 2009 and has shipped more than 1,450 cargoes from the two LNG production trains that are currently operating, with a production capacity of up to 7.6 million tonnes of LNG per year.
Head of the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) Dwi Soetjipto said that, in addition to providing certainty of gas supply, the extension of the Cooperation Contract (PSC) for the Tangguh block will also bring in an additional investment commitment of up to US$4.6 billion. In addition, it is also projected that the state will receive revenues of up to US$5.5 billion from 2035 to 2055.
"This contract extension also has a positive impact in the form of a contribution in driving the national and regional economies, as well as other multiplier effects," he said.
According to him, the extension of the cooperation also reflects the government's commitment to continue to create a conducive investment climate, as well as provide certainty for investment activities in Indonesia. Moreover, Tangguh has been the largest gas producer in Indonesia, where around 20% of domestic gas production comes from the project.
Anja-Isabel Dotzenrath, BP Executive Vice President of Gas & Low Carbon Energy, said that the contract extension provides an opportunity for her party to continue the work that has been carried out together with the government and SKK Migas.
“This extension helps open up new opportunities for Tangguh's future,” said Anja-Isabel Dotzenrath.
Anja-Isabel Dotzenrath said BP has a strong commitment to continuing long-term cooperation to meet energy needs in Indonesia.
"We look forward to further cooperation with Indonesia and our partners in the coming years," said Anja-Isabel Dotzenrath.
Meanwhile, BP Regional President Asia Pacific, Gas & Low Carbon Energy Kathy Wu said that the contract extension received by his party allows the company to continue accelerating domestic upstream oil and gas exploration activities.
"With the addition of our new blocks in Indonesia, this all shows our trust in the Government of Indonesia in continuing investment, and presenting various solutions to energy needs," said Kathy Wu.
Apart from currently developing the Tangguh Train 3 project, BP and its partners have also started the Tangguh UCC Project which includes the development of the Ubadari Gas Field, enhanced gas recovery (EOR) through carbon capture, use, and storage (EGR/CCUS) in the Vorwata field, as well as onshore compression.
Apart from the Tangguh LNG Project, BP also has interests in the Andaman II Block, as well as the Agung I and Agung II Blocks.
Gas needs
On a separate occasion, the International Energy Agency (IEA) projects that gas power plants will still grow to replace the coal-based steam power plant (PLTU) in the net zero emission scenario.
Until 2035, IEA predicts that gas will still be used to bridge the transition of global energy, especially when the transition from PLTU to new and renewable energy-based power plants (EBT).
In its research, the Reforminer Institute noted that the development of gas-based power plants has a number of advantages, such as capacity factor which is quite high and becomes one of the base load power plants, investment costs per megawatt (MW) for gas-based power plants are cheaper compared to the electric steam power plant (PLTU), geothermal power plant (PLTP), and Nuclear Power Plant (PLTN)
Komaidi Notonegoro, Executive Director of the Reforminer Institute, said that oil and gas still have an important role in the Indonesian primary energy mix, and are projected to still be important up to 2050.
"Oil and gas shares in the Indonesian primary energy mix 2021 are around 51%, and in 2050 shares are projected to still around 44% of the total Indonesian primary energy consumption," he said.
According to him, the National Energy General Plan (RUEN) also projects natural gas in the Indonesian primary energy mix in 2050 to be around 24%, the second largest after EBT.
From 2012-2021, the portion of gas utilization for domestic purposes increased by an average of around 1.50% per year.
The industrial and fertilizer sector is recorded as a major contributor to increasing domestic natural gas consumption.
"The discovery of Indonesian oil and gas reserves in 2020-2021 was also dominated by natural gas, such as discoveries in Bronang-02, Wes EEL, Parang-02, Rembang-3B, and Wolai-02.
Candidates for the National Strategic Project of the Energy Sector 2020-2024 are also dominated and related to the use of natural gas, "he said.
This makes natural gas have a more important role as a bridge in the implementation of fossil energy transitions to EBT.
Sugeng Suparwoto, Chairperson of Commission VII of the People's House of Representatives (DPR), said that oil and gas will still be an important sector of economic growth in Indonesia. For this reason, the government must think of ways to reduce emissions produced by fossil energy.
He explained that the portion of EBT in the energy mix in 2050 was projected to be only 31%. That is, the remaining 69% will still be filled by fossil energy, fuel oil, coal, or natural gas.
"The world is also currently very dependent on fossil energy. This can be seen from OPEC+ which still produces around 100 million barrels of oil per day, "he said in an energy transition forum.
In an effort to reduce emissions from the oil and gas industry, the government can issue regulations related to the quality of fuel oil that is low in carbon and sulfur. That way, carbon emissions can still be reduced, without having to sacrifice the industry that has been a source of state revenue.
According to him, the upstream oil and gas industry must continue the exploration and exploitation of existing resources to ensure the meeting of community energy needs.
It's just that later the oil and gas produced should no longer become primary energy, but be processed into petrochemical derivative products.
The reason is that Indonesia is still importing petrochemical products in very large quantities. During this time, only the fertilizer industry utilizes natural gas as raw material in the process of fertilizer production.
Another step that can be done is to optimize the use of natural gas as intermediate energy because the commodity is lower emissions. In addition, the use of natural gas can also reduce the import of liquefied petroleum gas (LPG) which has been burdening the state budget.
"The government must also be consistent in efforts to increase national oil and gas production, because until now there are still around 68 oil and gas basins that have not been managed, and most are natural gas," he said.
Bisnis Indonesia, Page-4,Monday, Dec 26, 2022
