Pertamina will Boost Production of Rokan Block to Be 200 Thousand BPH

PT Pertamina (Persero) is committed to increasing oil production from the Rokan Block to return to 200 thousand barrels per day (BPD) after its management switches to the company in August 2021. On the other hand, the Regional Government hopes to get dividends from the oil and gas block starting in 2022.

the Rokan Block in Riau

PT Pertamina Hulu Energi (PHE) President Director Budiman Parhusip said that after the management of the Rokan Block switched to Pertamina starting on August 8, 2021, he would immediately continue drilling wells in the oil and gas block. Continuity of drilling activities is needed to increase oil production from the oil and gas block in Riau Province.

the Rokan Block

"So that from [production] 170-180 thousand BPD, we will try to increase by drilling a lot of wells so that it can reach 190-200 thousand BPD in the future, maybe even higher," he said.

He said well drilling was one of the strategies to increase Rokan Block oil production. In addition, another strategy is that it will try to apply some new technologies such as 3D seismic technology, see the possibility of doing advanced oil recovery (enhanced oil recovery / EOR) with chemicals, and other technologies.

PT Chevron Pacific Indonesia

Budiman added that his efforts to increase oil production in the Rokan Block highly depend on the implementation of the management transition period from PT Chevron Pacific Indonesia. At present, it is being discussed how to keep Chevron from drilling new wells in late 2020 and in 2021 to curb the decline in Rokan Block production.

"We hope that production can be maintained in the range of 170-180 thousand BPD when Pertamina takes over," he said.

This includes the preparation of a work program in the Rokan Block for next year. Thus, Pertamina has got a clear picture of what activities must be carried out once the management of the Rokan Block by Chevron ends.

"So, in August 2021, we were clear about what would be done, continue what the previous operator had done, even improved," said Budiman.

Satya W Yudha

Expert Advisor to the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) Satya W Yudha revealed, the transition period for the management of the Rokan Block must take place well so that production does not go down. So far, there have been plans to drill wells by Chevron in 2020 and early 2021 to keep the production of the Rokan Block from falling dramatically. Although this matter needs further discussion with Chevron and Pertamina.

As per the proposal, Chevron will operate 2 rigs to drill 11 wells in the Rokan Block in November-December this year. Furthermore, in January next year, Chevron will run 5 rigs to drill 96 wells. Estimated costs needed for drilling are US $ 11 million in 2020 and US $ 115 million next year. In 2020, he acknowledged that the additional oil production from drilling activities was very small, namely only 500 BPD.

"We hope that if the commitment is carried out properly by Chevron, there will still be an additional 5,000 BPD when it is submitted to Pertamina in 2021. So the production will be 175 thousand BPD," Satya said.

On the other hand, according to the contract, Pertamina has a definite work commitment (KKP) for the first five years in the Rokan Block worth the US $ 500 million or around Rp 7.2 trillion. Some of the activities to be funded by the CTF include an EOR study of US $ 4 million, drilling of 11 exploration wells of the US $ 69.8 million, drilling of five Telisa wells of the US $ 18.1 million, stage-1 CEOR 7 pattern of US $ 247 million, and stage-1 steam flood Kulin or Rantau Bais US $ 88.6 million.

Regional Participation

Meanwhile, Deputy Governor of Riau Edy Natar Nasution revealed, the region is entitled to a Participating Interest (PI) of 10% in the Rokan Block. The right to this PI is automatically owned by the regional government once the Chevron contract in the Rokan Block ends on August 8, 2021. 

     Once the management switches to Pertamina, SKK Migas will write to the Governor of Riau to ask for his interest in the PI 10%. Once approved by the Minister of Energy and Mineral Resources (ESDM), his party will begin the process of taking the 10% PI and receive a share of the revenue.

"We hope that in 2022, the Riau Province and related regency governments can already receive dividends from the 10% PI," said Edy.

However, he admitted, his party had yet to establish a Regionally-Owned Enterprise (BUMD) that would manage the Interest Participation of that part of the area. At present, his party is still conducting a selection of its BUMDs to determine who is managing the PI 10%.

"The governor who determines [BUMD manager] after the selection is complete," he added.

In accordance with the Minister of Energy and Mineral Resources Regulation No. 37 of 2016, oil and gas contractors are required to transfer management rights to local governments by 10% by offering it to BUMD. The offer was made since the approval of the first field development plan.

Each BUMD may only be given PI management for one work area. The 10% PI offer to BUMD is carried out through a cooperation scheme with the contractor. The cooperation scheme is carried out by means of advance financing by the contractor.

In addition, Edy also hopes that there will be opportunities for local entrepreneurs and the people of Riau to be involved in the implementation of the project once the Rokan Block is managed by Pertamina. The reason is, as soon as oil prices fall due to the Covid-19 pandemic, the regional budget (APBD) of its region is also affected. This is because about 65-80% of the APBD still relies on oil and gas revenue-sharing funds. 

      As of the end of March, Rokan Block's oil production was far higher than the target of the 170,763 bpd State Budget (APBN), which reached 182,350 bpd. Until the end of the year, Rokan Block's oil production is projected at 172,434 bpd.

Investor Daily, Page-10, Wednesday, July 22, 2020

SKK Migas Urges Chevron to Immediately Decide on the Fate of the IDD Project

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) urged Chevron Indonesia to immediately ensure the continuation of the .

SKK Migas Head Dwi Soetjipto revealed that his party was still waiting for a report from Chevron regarding the follow up of the IDD Project. He said he had even pursued an oil and gas company from the United States to rush to make a decision whether to continue this project or not.

"So our position is waiting for a report from Chevron. Of course, this should not be protracted, and we have urged Chevron, "he said.

It understands that after the Covid-19 pandemic and low oil prices, many planned activities must be reviewed by oil and gas companies. The current condition has an impact on all major oil and gas projects in the world. As a result, Chevron's follow-up on the IDD Project has been hampered.

    However, it urged Chevron to immediately report its plans related to the IDD Project. Moreover, Chevron is not the only oil and gas company interested in working on the deep-sea gas project in the Makassar Strait.

"Actually there are other parties who are also interested in this matter [IDD Project]. But of course, we are waiting for the official report from Chevron first, "said Dwi.

Referring to SKK Migas data, as of last June, the IDD Project is still in the process of evaluating the approval of the revised development plan (POD). In addition, the project is also still in the process of evaluating the proposed production sharing contract (PSC) for the Rapak Oil and Gas Block and Ganal Oil and Gas Block.

The IDD project combines two oil and gas fields, namely Gendalo Field, Ganal Block, and Gehem, Rapak Block. Still based on SKK Migas data, the project is targeted to reach peak gas production of 844 million cubic feet per day / MMscfd and 27 thousand barrels of oil per day (BPD). The US $ 6.98 billion projects are planned to start operating in the fourth quarter of 2025.

In fact, the Rapak Block contract will expire in 2027, while the Ganal Block in 2028. In addition, Deputy Head of SKK Migas Fatar Yani Abdurrahman had revealed, there was a change in the design of the IDD project, namely the production platform was moved to shallow water. Therefore, POD changes are needed.

    In the IDD Project, Chevron is the operator and majority shareholder of 63%. Chevron is working on this deep-sea oil and gas project along with other joint venture partners, namely Eni, Tip Top, PT Pertamina Hulu Energi (PHE), and Muara Bakau partners.

Investor Daily, Page-9, Saturday, July 18, 2020

STIMULUS FOR TARGET CHASE

The Special Task Force for Implementing Oil and Gas Business Activities finally

provided the stimulus to the Cooperation Contract Contractors (KKKS) to increase

investment in the upstream oil and gas sector.

With the stimulus in the form of a delay in depositing the Abandon and Site Restoration Fund (ASR) 2020, it is hoped that KKKS production activities will remain optimal amidst the pressure of world oil prices and the influence of the Covid-19 pandemic.

Dwi Soetjipto

The Head of SKK Migas, Dwi Soetjipto said that the provision of incentives was a policy that was pursued to overcome the financial and operational problems of KKKS.

"I hope that KKKS can take advantage of this policy, then immediately carry out activities to increase production. "This is our joint effort to oversee the target for this year and the years to come," he said.

For contractors who need relaxation, a special ASR deposit fund for 2020 can be given to SKK Migas no later than July 31, 2020. Furthermore, the value of the ASR request that has been postponed will be billed immediately in the semester I / 2021, added with time.

ASR funds are funds prepared by KKKS at the time of post-operation, for permanent Well closure, temporary stopping, and production facility assistance, to be able to restore or demolish permanently and restore the environment in the Work Area (WK).

Director of Engineering and Environment of the Directorate General of Oil and Gas at the Ministry of Energy and Mineral Resources Adhi Wibowo said the stimulus provided was valid for all WK oil and gas, not just the Rokan Block.

the Rokan Block

"It was taken from a scenario determined by the government, what about providing stimulus, it is hoped that the business/oil and gas sector in the Covid-19 period will continue," he said.

Meanwhile, the target of lifting oil this year is cut to 705,000 barrels per day (BPD), from the previous target of 725,000 BPD, and which was originally in the state budget is 755,000 BPD. Oil and gas companies appreciate the government support for KKKS by providing flexibility in relation to the preparation of ASR funds because it will have a good impact on the company's cash flow.

"The impact on development and operations is being studied in more detail," said Pertamina Hulu Energi President Director Budiman Pahursip.

The Executive Director of the Indonesian Petroleum Association (IPA) Marjolijn Wajong assesses that the ASR funds can ease the burden on upstream oil and gas industry businesses.

"This policy can help the oil and gas industry to maintain the current condition of the world oil price is low and prevent the economic crisis after the Covid-19 crisis," She said.

This was justified by the Teaching Stal of Trisakti University Pri Agung Rakhmanto.

"Some significant and effective are certainly not the same for each KKKS. However, when oil prices are indeed still low like this, improving cash flow will be very helpful for KKKS to be able to maintain normal management of increasing production reserves or lifting, "he said.

Observers in the upstream oil and gas sector, Tumbur Parlindungan assessed that with the stimulus, KKKS can divert their budgets for operational production activities.

"Activities such as good service or maintenance or well development drilling."

Rokan Block

Meanwhile, PT Pertamina Hulu Energi as the upstream sub-holding of Pertamina will immediately drill a well in the Rokan Block when the transition period is complete, in accordance with the decline in value and increase production and the oil block. Director of Pertamina Hulu Energi Budiman Pahursip is optimistic that his party can increase production above 170,000 barrels of oil per day (bopd).

"We can succeed by drilling many wells so that we can reach 190,000 bopd-200,000 bopd in the latter days. We need to use technology applications such as 3D seismic, steam, steam, and look to ask for EOR [Enhanced Oil Recovery], and with other technologies that we can apply, "he said.

Satya Widya Yudha

On the other hand, Supporting SKK Migas Expert Satya Widya Yudha believes PT Chevron Pacific Indonesia is able to increase the production of the Rokan Block WK to 5,000 barrels per day in July 2020 production to 170,000 bopd.

"Even though it is still over in 2021, we are still asking for drilling," he said.

CPI will continue until the transition process in August 2021. Furthermore, in January 2021-July 2021, CPI will drill 96 wells and 11 conversion wells. Meanwhile, CPI will spend an investment of US $ 11 million this year and the US $ 143 million for drilling in 2021. Meanwhile, Pertamina will also open up opportunities for local partners in the Rokan Block after the transition process is completed, as an effort to increase the level of the domestic component (TKDN) in the Rokan Block working area.

"TKDN must be increased, it must be Pertamina's commitment which will be continued by Hulu Rokan that the increase in TKDN must be truly improved
the participation of local companies must be optimized, "said Budiman.

Deputy Governor of Riau, Edy Natar Nasution said that his party would optimize Riau's Regional Business Entity (BUMD) which would get a 10% participation right in the Rokan Block. He hopes that the people in the Rokan Block will provide equal opportunities both to carry out the project and workforce with the KKKS. In addition, the Rokan Block contributes around 65% -80% to Riau's APBD because it still relies on funds for oil and gas proceeds.

"Our hope is that in 2022 the Riau Provincial Government and the City Government can receive BUMD dividends from the PI 10%," he said.

Meanwhile, the Riau Community Leaders Communication Forum asked for a return from President Joko Widodo's campaign pledge to give priority and special rights to Riau Residents in the Rokan Block.

Bisnis Indonesia, Page-4, Friday, July 17, 2020

Government finances Chevron investment

The government has decided to bear the investment of PT Chevron Pacific Indonesia (CPI) in the Rokan Block. This was done as an effort by the government to hold back production cuts before PT Pertamina (Persero) officially managed the block.

Deputy for Maritime Sovereignty and Energy Coordinating Ministry of Maritime Affairs and Investment Purbaya Yudhi Sadewa said that efforts to maintain the capacity of national oil and gas producers in the Rokan Block were very important.

the Rokan Block

Therefore, investment in drilling there must continue. On this basis, the government decided to bear the investment costs under the Rokan Block Production Sharing Contract (PSC) scheme. In this case, the party executing the drilling investment is the Cooperation Contract Contractor (KKKS). namely Chevron.

However, the investment value will be calculated in the cost recovery scheme. Therefore, the government will return the investment costs made by KKKS so our intention in that investment is that the government continues to contribute according to the PSC scheme, "Purbaya said.

As for now, Chevron and the Special Task Force for Pelalsana Upstream Oil and Gas Business Activities (SKK Migas) have conducted very intensive communication. The two parties will sign an agreement and adjustment document for the PSC, for which the current investment scheme in the transition to management of the Rokan Block will be included.

Fajriyah Usman

Pertamina Corporate Communication VP Fajriyah Usman said that the company targets to drill 44 wells in 2021 when the transfer of management of the Rokan Block occurs in August 2021. 

    Currently, Pertamina is conducting preparations for the drilling program, including the procurement of logistics, rigs, and crew to ensure that PT Pertamina Hulu Rokan (PHR) can immediately conduct drilling, as soon as the transfer transition process is completed in August 2021.

Kontan, Page-10, Saturday, July 11, 2020

Rokan Drilling Keeps Target Lifting

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) is projecting drilling of 200 wells in the Rokan Block to maintain the lifting target next year.

the Rokan Block by Chevron

"In the Rokan Block, we are targeting the drilling of 200 wells by 2021," said SKK Migas Head Dwi Soetjipto.

PT Chevron Pacific Indonesia

At present, SKK Migas is still seeking investment certainty from PT Chevron Pacific Indonesia and Pertamina in the transition period over management. According to Dwi, this needs to be done to prevent production cuts when Pertamina enters as Rokan Block manager in August 2021.

Previously, Pertamina revealed that it would drill 44 wells following the management of the Rokan Block in August next year. PT Pertamina Corporate Communication VP Fajriyah Usman explained, with the additional drilling in stages, Pertamina would contribute around 60% to national oil and gas production in 2021.

Fajriyah Usman

"Pertamina is aware of the objective conditions in the Rokan Working Area that are already mature, so it is committed to holding back the pace of production decline," She said.

To support the drilling target, Pertamina made a number of preparations such as the procurement of logistics, rigs, and crew to ensure it could drill directly after the process of management transfer was complete. On the other side, SKK Migas ensured that oil and gas lifting in 2021 will be lower than this year, due to the influence of the corona pandemic (Covid-19).

SKK Migas pegged to oil and gas lifting next year at 1.71 million barrels of oil equivalent per day (boepd), which includes 705,000 barrels of oil per day (bopd) of petroleum and 1.01 million boepd of gas. As of May 2020, the realization of oil and gas lifting reached 1.71 million boepd. This figure is still equivalent to 88.996 of the APBN target of 1.95 million boepd and 99% of the Work Plan & Budget (WP and B) target of 1.80 million boepd.

"It is estimated that by the end of the year lifting will only be 1.70 million boepd," Dwi said.

Kontan,  Page-13, Friday, June 19, 2020

Oil Lifting 2020 Predicted 705 Thousand BPD

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) projects national production of ready-to-sell oil (facelift) up to the end of the year to only reach 705,000 barrels per day (BPD) or more than the security of the security of the food security) by 755,000 BPD. 

   

  This is through with the Covid-19 pandemic. However, SKK Migas is starting to commit to a recovery starting next year. In 2030, oil is targeted to reach 1,000,000 BPD.

"Applying 705,000 BPD that makes sense, we can obtain in 2020. Raise the challenge we are discussing is restoring next year so that next year does not decline again," said SKK Migas Head Dwi Soejipto.

Dwi Soejipto

Dwi said the raised projections were from 15 cooperation contract contractors (KKKS) representing 96% of the national production line. In the first place was occupied by Mobil Cepu LTD then accepted by PT Chevron Pacific Indonesia (CPI) with the Rokan Block.

PT Chevron Pacific Indonesia (CPI)

Although Chevron finished managing the Rokan Block in August 2021, efforts to optimize production are still carried out. It was estimated that it would have decreased by 20 thousand BPD but until the end of May, it could still produce 180 thousand BPD. 

the Rokan Block from Chevron (CPI)

    He said SKK Migas was guarding the transition period for the management of the Rokan Block from Chevron (CPI) to Pertamina. This is to avoid a decrease in production as happened in the Mahakam Block.

the Mahakam Block

"We hope that by the end of the year we will be able to optimize easily. Currently, it is still being discussed with CPI so that they can invest again in this transition period, "he said.

Dwi further agreed to wait for oil and gas projects scheduled to be completed this year. In the third quarter of 2020, a number of migration projects began production, the Malacca Strait Project Phase-1, the Beauty Field in the Belida Block, the Betung Compressor Project and Musi Timur SKG-19, the Meliwis Field in the Madura Offshore Block, and the Peciko Field in the Mahakam Block.

 

"We are optimistic that the additional production from these projects will help achieve the year-end appointment target," Dwi said.

In 2020, SKK Migas starts 11 oil and gas projects can start onstream. To date, five oil and gas projects have been approved and can provide additional oil production of 3,182 BPD and gas 109.5 million standard cubic feet per day / MMSCFD.

Dwi further revealed that there were 4 national strategic projects among Tangguh Train 3, which began at the completion of 2020 essence, until the end of III or the end of 2021. Realization until May 2020 was approved for land 82.45% of the target of 83.15% and offshore 98.15% offshore 98.15% of the target of 99.35%.

Jambaran Tiung Biru

Then, Jambaran Tiung Biru is planned to be streamed from the third quarter of 2021 to the fourth quarter of 2021. Introduced until May yesterday received 64.54% of the 69.60% target. The next project is being prepared by Inpex Abadi Masela and expected to be streamed in 2027. 

Inpex Abadi Masela

   While the Indonesia Deepwater Development (IDD) project for the Gendalo and Gehem working areas is in the process of improving the consortium and developing a development plan (Po) to Development (PoD) to Development (Po)

Gendalo and Gehem Project by Chevron

Oil and Gas Potential

He explained, Indonesia has a huge oil and gas potential with 128 basins. Of these, 27 basins have been produced. He said there was a need to transform possible into the second package by declaring the production of one million barrels in 2030. He said the government was now more flexible for investors to choose the production sharing contract between Gross Split or Cost Recovery.

But he asked for legal protection made by the Oil and Gas Law to guarantee certainty for investors. Even though production reaches 1 barrel jute in 2030, by 2030 it is projected that the demand for fuel oil (BBM) reaches 2.7 million barrels. This means that industry support is needed for fuel oil to gas.

"There must be a policy that encourages using gas, getting relief from those who use fuel," Dwi said.

Investor Daily,  Page-1, Tuesday, June 16, 2020

Upstream Oil and Gas Preparing to Go

Upstream oil and gas industry players are gearing up to spur operational performance when the new normal order is implemented. 

Dwi Soetjipto

    The Head of the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) Dwi Soetjipto said that with world oil prices that have passed the level of US $ 40 per barrel became a positive sentiment for investment in upstream oil and gas activities in the country.

"With the improving oil price, investment in upstream oil and gas will also improve," he said.

Dwi added, his party would review upstream oil and gas activities to be more optimal.

"Next, we will wait for how to optimize activities in Hulu Migas in the new-normal era," he said.

Meanwhile, SKK Migas Deputy for Operations Julius Wiratno said that with the implementation of the new normal period it is expected that upstream oil and gas operational activities would be more productive.

"Because the mobilization of people and goods is not disrupted," he said.

SKK Migas has sent a circular to the Cooperation Contract Contractor (KKKS) related to the preparation and implementation of new normal operations. He revealed the preparation and implementation of new normal operations while adhering to existing health protocols and applicable in the area of ​​oil and gas operations. 

     There are no specific directives, which are important according to the existing protocol. "We're trying if we can quarantine before crew change for one week instead of 2 weeks," he explained.

Sonitha Poernomo

Chevron Pacific lndonesia Corporate Communication Manager Sonitha Poernomo said that the company continues to monitor the current Covid-19 pandemic situation. She said it had used guidelines from international and domestic health authorities.

"Our main concern is employee health and safety and we take precautions to reduce the risk of exposure by ensuring safeguards are available and functioning properly," She said.

Similarly, PT Medco Energi International Tbk. ensuring the sustainability of the company's operations during the Covid-19 pandemic. 

Hilmi Panigoro

     President Director of Medco Energi Hilmi Panigoro said that the company is committed to safeguarding the safety of workers in the work area and maintaining business continuity by complying with the Covid-19 health and safety protocols regulated by the government.

He said that his party was facing a period full of challenges. The rapid decline in energy demand in the face of increasing oil production is a challenge for the industry.

"However, Medco Energi is optimistic that it will succeed in facing challenges caused by the Covid-19 pandemic," he said.

Previously, Medco targeted the company's oil and gas production this year to reach 110,000 barrels of oil equivalent per day. In another development, PT Pertamina Hulu Energi said it would recalculate the economic value of the project in line with the upward trend in oil price movements.

Director of Pertamina Hulu Energi (PHE) Meidawati said that all projects undertaken would recalculate their economic value. The calculation was carried out on several exploration and development drilling projects that can maintain and increase the company's oil and gas reserves and production.

Bisnis Indonesia, Page-4, Thursday, June 11, 2020.

The Government Must Tidy Up to Improve the Investment Climate

The government must fix the management of national upstream oil and gas if it wants to increase oil and gas investment after the Covid-19 pandemic. The reason is that although oil prices have begun to rise after OPEC + cuts oil production, oil and gas companies will be more selective in choosing the locations where they invest.

Energy observer from Trisakti University, Pri Agung Rakhmanto said, the current oil price trend has not been able to stimulate national upstream oil and gas investment. This condition is likely to last until next year. To increase national upstream oil and gas investment, the government is judged to need to improve the competitiveness of the upstream oil and gas business.

"How to be able to attract large scale investment, because competition in the global market to attract investment will be very tight," he said.

The improvement needed is that the government solve the problems that have been around. Some of these include completing the revision of the Oil and Gas Law, ease of operation, and improving the quality of the work areas being auctioned and including the quality of the data. Current conditions make solving these problems even more important for national upstream oil and gas investment.

The same was expressed by the Former OPEC Governor for Indonesia Widhyawan Prawiraatmadja. According to him, oil and gas companies will not be aggressive in investing if crude oil prices have not exceeded the limit above US $ 50 per barrel. However, projects that have been committed by the company will continue, such as the development of the East Sepinggan Block which is postponed to next year.

"But for something new, especially exploration, will be delayed for a very long time until the price returns to a very good level in a sustained time," he explained.

In this condition, he advised the government to provide incentives for the upstream oil and gas sector and gas infrastructure. According to him, the incentives in the gas infrastructure sector will provide consumers access to enjoy liquefied natural gas / LNG whose prices are down.

"Instead of LNG we are exported at low prices, it is better to be used domestically so that it helps the industrial sector. LNG is currently cheaper than gas pipelines. The key is the existence of gas infrastructure, specifically for LNG regasification, "Widhyawan said.

While Former Deputy Minister of Energy and Mineral Resources (ESDM) Rudi Rubiandini suggested the government to change the way of managing national upstream oil and gas so that oil and gas investment is attractive again. One of them is by not giving up the management of all completed oil and gas blocks to PT Pertamina (Persero).

Chevron

Granting management rights to Pertamina must be accompanied by an evaluation related to block oil and gas production. According to him, maintaining world-class oil and gas companies such as Chevron and Conoco-Philips is a way to maintain current oil and gas production so as not to decrease significantly. Furthermore, if these companies do not leave, the government can offer a new scheme that encourages exploration activities.

Conoco-Philips

"Then the company can be asked to explore with a scheme that makes them not afraid as before after there will be a discovery of new reserves. So that there is hope for the future, "explained Rudi.

Previously, he said oil and gas companies were reluctant to explore because of concerns that management rights would not be continued.

Fluctuating Potential

Related to the movement of world crude oil prices, Widhyawan revealed, it had started to move up. This is because OPEC + and non-OPEC + countries cut their oil production very drastically. In addition to the agreement between OPEC + countries, this production reduction is also assessed because some fields are not economical to produce, where most of the production costs are higher than prices.

This is supported by the easing of mobility restrictions (lockdown) which increases oil demand. For example, in the United States, sales of gasoline and aviation fuel have risen again after briefly reaching their lowest levels as people move. Oil prices will improve in line with increased demand at the time of reduced production.

"In my opinion, this will continue until the end of the year and beyond unless there is a phase two pandemic that makes some countries forced

restriction, "explained Widhyawan.

Pri Agung also expressed the same thing. According to him, easing lockdown, reducing oil production by OPEC +, and cutting shale oil production are factors driving improving oil prices.

"With the 'new normal' scenario which is rather optimistic, oil prices will be the US $ 30-40 per barrel or more. This is more likely to happen, "he said.

Rudi also predicts that oil prices will still be in the range of US $ 30-40 per barrel because production cuts by OPEC + have not had a maximum impact. This is because oil stocks have not decreased significantly because oil demand is still low due to Covid-19.

"Maybe the end of the year or early next year will be able to reach above the US $ 40 per barrel like a number that makes producers start producing," he said.

This condition, according to Rudi, will still be very difficult for the national upstream oil and gas industry. He explained that for oil and gas companies that have managed oil and gas blocks in Indonesia, oil prices of US $ 30 per barrel can only make the company alive.

Investor Daily, Page-10, Tuesday, June 2, 2020

The government is advised to invite oil and gas junior companies

The government is advised to invite junior companies (small companies) that focus on oil and gas exploration activities. This is because the discovery of significant oil and gas reserves is the key to achieving the target of producing 1 million barrels of oil per day (BPD) by 2030. 

       Practitioners of Oil and Gas Tumbur Parlindungan revealed that large oil and gas companies rarely voluntarily disburse large funds for large-scale exploration activities. This can be seen from the lack of large oil and gas companies participating in the management of new oil and gas blocks through auctions held by the government.

For this reason, he advised the government to invite junior companies to look for potential oil and gas reserves in the country. This is because, in the world, junior companies usually focus on finding oil and gas reserves to be sold to large oil and gas companies. He gave an example, the discovery of large gas at Tangguh was actually carried out by Arco. However, BP, which is now the operator there, acquired the company.

"We need to invite small companies but want to take exploration risks. We need pioneers who want to drill, we need players who want to play exploration, big companies focus above 100 million barrels and above, "said Tumbur.

According to him, data on oil and gas reserves owned by Indonesia are currently difficult to compete with other regions. At present, large oil and gas companies are actually targeting Africa, which has proven oil and gas reserves in large quantities. This will only happen in Indonesia if there are 11 proven huge oil and gas reserves.

"The company will come if the reserves are proven large," said Tumbur.

Tumbur explained, large companies such as Shell, Chevron, Exxon, and Total would not be interested in oil and gas reserves whose volumes were less than 100 million barrels of oil equivalent. 

Furthermore, companies such as HESS, ConocoPhillips, and National Oil Company (NOC) such as Petronas, PTTEP Thailand, Repsol, will only glance at one area if the reserves are more than 50 million barrels of oil equivalent. 

In fact, he continued, the flow of foreign investment funds is very important so that exploration activities can run massively in Indonesia.

Blogger Agus Purnomo in Petronas PC Ketapang

"We see that our oil and gas block auction is not very large, so it will not be in demand by large companies," he said.

Repsol

On the other hand, the success of finding oil and gas reserves (success ratio) in Indonesia is still less than 50%. This could also be an obstacle to achieving the 1 million BPD oil production target. He gave an example, the findings of oil and gas in Ande-Ande Lumut could be one of the big findings, but the problem of monetization and the use of technology could hamper its development.

Referring to the data of the Ministry of Energy and Mineral Resources (ESDM), the number of the signing of production sharing contracts (PSCs) from oil and gas block auction results has been relatively low since 2015. In 2015, the government signed 8 PSCs. But afterward, although the auction was still held, in 2016-2017, not a single PSC was signed. Furthermore, as many as 11 PSCs were signed in 2018 and 6 PSCs last year. In fact, the signing of the PSC in Indonesia touched 26 contracts in 2011.

Inline, the realization of national oil and gas exploration investment has also been relatively low since 2015. In 2015, the realization of exploration investment was recorded to still reach the US $ 970 million. However, this exploration investment continues to decline to the US $ 916.2 million in 2016, US $ 576.55 million in 2017, and rose to the US $ 786.18 million in 2018. In fact, exploration investment in Indonesia once touched the US $ 3, 05 billion in 2013.

Must be planned

Another strategy from the government to reach the target of 1 million BPD is through enhanced oil recovery (EOR) activities. According to Tumbur, this EOR activity must be planned from the beginning in the development of an oil and gas block. The reason is that EOR activities will not be effective and will require large costs if they are only carried out when the oil and gas reserves of an oil and gas block are almost gone.

"During the decline, the energy strategy has been lost. If it was only EOR at that time, the cost was more expensive. EOR continues improvement, there are pilots from the start. If it's already [production] road it's difficult to run, "said Tumbur.

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) once made an additional projection of oil production from EOR activities. Referring to the projection, the newly initiated EOR activities can significantly increase oil production starting in 2025. Referring to the data, national oil production is projected to only be 281 thousand BPD by 2030 if no EOR activities are carried out. However, if the EOR is successfully implemented, oil production can be bent to 520 thousand BPD that year.

However, at present, the EOR activities are still in the pilot phase. PT Pertamina (Persero) through Pertamina EP has implemented EOR in Tanjung Field. The company has also signed the points of understanding between Pertamina and Repsol for full-scale management, including the implementation of surfactant-polymer EOR. In the Jirak and Rantau Fields, Pertamina is conducting a study of the application of surfactant chemicals for the implementation of EOR in both fields.

Furthermore, related to CO2 flooding, Pertamina is currently conducting studies in several fields, namely Jatibarang, Sukowati, and Ramba. Pertamina also expanded this EOR activity to the oil and gas block managed by PT Pertamina Hulu Energi (PHE), namely in the North West Java Offshore Block, precisely in the Zulu Field and E-Main. In addition, in the near future the Batang field, which is operated by PHE Siak, will be an EOR steam flooding pilot project.

Investor Daily, Page-9, Thursday, May 9, 2020