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Showing posts with label ESDM. Show all posts
Showing posts with label ESDM. Show all posts

Tuesday, August 1, 2017

ESDM Auditing of Inpex Funds US $ 1.6 M



A letter from the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) was sent to the editor of KONTAN. The letter numbered SRT-0138/SKKMA0000/2017/SO is related to the development of Abadi Field, Masela Block.

Blogger Agus Purnomo In SKK Migas

 The SKK Migas letter was addressed to Inpex Masela Ltd. dated 22 May 2017. In the letter, the government agreed to all Inpex's wishes in developing the Masela Block. The Ministry of Energy and Mineral Resources (ESDM) confirmed the letter. ESDM admits that the government is encouraging Inpex to immediately conduct a preliminary design study of the Abadi Field, Masela.

Abadi Field, Masela Block.

There are five important points in the letter. First, the government is willing to replace US$ 1.6 billion in cost recovery. Second, SKK Migas approved a production capacity of 9.5 million tons of liquefied natural gas (LNG) per year and pipe gas of 150 mmscfd.

Blogger Agus Purnomo In SKK Migas

 Third, Inpex received a seven-year change of time, from the contract expiring in 2028 to 2035. This is because since 1998 the policies in the Masela project have often changed. Fourth, SKK Migas will discuss the addition of the Masela contract for a period of two to 10 years. Fifth, the location of the onshore LNG plant around Yamdena Island, West Saumlaki, East Saumlaki, and Kore on Selaru Island.

 Arcandra Tahar, Deputy Minister of Energy and Mineral Resources confirmed that SKK Migas' letter to lnpex is being audited, including approval of a refund of approximately US$1.6 billion to Inpex Masela Ltd.

"It doesn't necessarily mean that the letter given is approved, but it will be audited first," said Arcandra.

 The replacement of US$ 1.6 billion is not in the form of cash, but cost recovery when the Abadi Field is already in production. According to the contract, Masela Block will continue to use cost recovery profit-sharing instead of a gross split.

 Meanwhile, Fahmi Radhi, an Energy Observer from Gadjah Mada University, said that the state should not spend US$ 1.6 billion for Inpex Masela Ltd. as compensation for the presidential decision to move the refinery from onshore to offshore.

"Reimbursement of that amount does not guarantee that the Masela Block will start operating immediately. Inpex Masela Ltd. still needs to recalculate for offshore operations," he added.

Unfortunately, Amien Sunaryadi, the Head of SKK Migas, did not answer KONTAN's confirmation about the replacement of the funds.

 Deputy for Procurement Control of SKK Migas, Djoko Siswanto, only answered briefly. "Sorry I don't deal with that anymore," he said.

 Inpex Corporation Senior Communication Manager Usman Slamet also did not answer the question of the change in funds. The government targets that within three months there will be gas buyers for the Masela Block.

"We prioritize domestic first," said Arcandra, Sunday (30/7).

 Now, the government is waiting for lnpex and Shell to do a pre-Front End Engineering Design (feed).

"The SKK Migas letter is ready, they should start working," said Arcandra.

The Masela Block is managed by PT Inpex Masela Ltd.(65%) and Shell Upstream Overseas Services Ltd (35%).

Kontan, Page-14, Monday, July 31, 2017

Wednesday, December 21, 2016

Trial “Gross Split



    In front of many stakeholders in the oil and gas sector, Deputy Minister of Energy and Mineral Resources (ESDM) Arcandra Tahar is like a lecturer in a classroom. By scribbling a black marker on flipchart paper, he explained to the audience about the gross split or the distribution of oil and gas revenue based on gross production. This concept will replace the profit-sharing contract model with a cost recovery component or recoverable operating costs.

    Arcandra explained, for an oil and gas working area that has won a tender winner, the government and the contractor who won the tender agreed at the beginning about the amount of profit sharing. He divides it into three stages, namely base split (basic division), variable split (variable or division component), and progressive split (progressive profit sharing). The government has determined the base split as a benchmark.

    So far, in the concept of cost recovery, the oil profit-sharing model is known to be 85 percent for the state and 15 percent for contractors. Meanwhile, gas revenue sharing is 70 percent for the state and 30 percent for contractors. Arcandra illustrates the base split with 70:30, which is 70 percent of the state share and 30 percent for contractors. 

    After the base split is agreed upon, enter the variable split section. The components consist of the type of working area (conventional or unconventional), carbon dioxide content, sulfur content, local content usage, production stages (whether using water, steam, or chemical injection methods), and oil prices.

    If the type of work area is non-conventional, the government provides incentives in the form of additional profit sharing on a scale of 1 to 5 percent to contractors. Likewise, if the CO2 and H2S content are high, the percentage of local content is high, and if the chemical injection method is used to drain the oil, the contractor gets additional incentives for profit sharing. Especially if the price of oil is high, for example above 100 US dollars per barrel, the government will be enlarged.

    Furthermore, for the progressive split, the higher the oil and gas production, the contractor does not get incentives. Then, does the gross split concept guarantee that oil and gas production in Indonesia will increase? Could be, but not the only guarantor. This is Arcandra's explanation. The government plans to start implementing this concept in 2017.

    Currently being prepared for legal protection. However, the government emphasized that the production sharing contract with the cost recovery scheme will be maintained until the contract expires. The Gross split applies to new oil and gas contracts. Why was the profit-sharing contract abandoned? The concept of cost recovery is believed to create inefficiencies.

Blogger Agus Purnomo in SKK Migas

    The calculations are also complicated. It is difficult for contractors to be expected to operate efficiently because they are guaranteed to be reimbursed by the state. The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) noted that this year alone, the cost recovery figure was US$11.4 billion. Meanwhile, the state revenue is 9.29 billion US dollars and the contractor's share is 3.175 billion US dollars.

    It is true that the contractor's assets that have been paid for in cost recovery become state assets. However, the value of assets in the form of operational equipment will definitely decrease in value. According to Arcandra, the gross split with the above scheme has never been implemented in any country. Now, it's just a matter of proving whether this concept is the best for Indonesia. Let time test it.

Kompas, Page-17, Wednesday, Dec 21, 2016

Tuesday, December 20, 2016

Oil and Gas Industry Efficiency


    
    Minister of Energy and Mineral Resources (ESDM) Ignasius Jonan challenged the oil and gas sector industry players to be efficient. This efficient practice will be applied to the gross split concept of profit sharing or oil and gas revenue sharing based on gross production. According to Jonan, the gross split concept is a directive from President Joko Widodo, who asks the upstream oil and gas industry in Indonesia to be efficient.

    If the concept of cost recovery (operating costs that can be returned) which has been abandoned by a number of countries is maintained, it will be difficult for Indonesia's upstream oil and gas industry to be efficient. It is the people who bear the cost of recovery. With a gross split with no cost recovery, the company must be efficient. However, for contracts with cost recovery, they are still respected until the expiration date,” said Jonan.

    Amien added that controlling cost recovery is more difficult than increasing Indonesia's ready-to-sell oil production. This year, it is estimated that the cost recovery to be paid to contractors is 11.4 billion US dollars, while the state's share is 9.29 billion US dollars and the contractor's share is 3.175 billion US dollars. Talking about the gross split described by Jonan, Syamsu believes that efficiency will be the key to winning the competition in the Indonesian oil and gas industry.

    The role of technology is very important in terms of efficiency. The efficiency that has been carried out by Pertamina during quarter III-2106 resulted in a net profit of 2.83 billion US dollars. Satya does not object to the government applying the gross split concept as long as there is still state control. 

    This concept is expected to prevent budget waste by contractors which must be borne by the state in the concept of cost recovery. The Ministry of Energy and Mineral Resources (ESDM) is preparing legal protection for the gross split concept which is planned to be implemented starting 2017. This concept is intended for new oil and gas contracts.

Kompas, Page-19, Tuesday, Dec, 20, 2016

Saturday, December 3, 2016

Jokowi: Freezing OPEC Members is No Problem


    President Joko Widodo believes the government's decision to temporarily freeze Indonesia's membership in the Organization of the Petroleum Exporting Countries (OPEC) will not cause problems. According to the President, the decision was taken to secure the State Revenue and Expenditure Budget (APBN).

"If you have to leave, there's no problem," said Jokowi, after opening the National Leadership Meeting of the Indonesian Chamber of Commerce and Industry, in Jakarta.

    Indonesia decided to temporarily suspend its membership in OPEC during the organization's 171st session in Vienna, Austria. The government delegation, Minister of Energy and Mineral Resources (ESDM) Ignasius Jonan, said Indonesia left because the OPEC meeting decided to reduce crude oil production to 1.2 million barrels per day (BPD) excluding condensate. OPEC asked Indonesia to cut domestic oil production by 5 percent (equivalent to 37,000 barrels per day).

    In fact, the need for state revenue is large, and in the 2017 State Budget Plan, it is agreed that oil production in 2017 will only decrease by 5,000 barrels compared to production in 2016," said Jonan, in a written statement.

OPEC said the production cuts would take effect in January 2017. Russia, which is not an OPEC member, agreed to cut its oil output to restore slumping world oil prices. According to Jonan, for Indonesia, which has been an oil importer since 2003, the OPEC agreement is not profitable. This is because production cuts will lead to price increases.

    The President assessed that the temporary suspension of Indonesia's membership in OPEC was appropriate to protect the state budget. In addition, the suspension of membership in OPEC is not a new issue for Indonesia. We used to be members and never become members. We enter again because we want information on price fluctuations and stocks in each country," said the President.

Indonesia once left OPEC in 2008 and entered again in 2015. Coordinating Minister for the Economy Darmin Nasution believes that Indonesia's exit from OPEC will have a good impact on state revenues.

    This is because the role of Indonesia's oil production is not significant to international oil conditions. If we are outside, it's not too different," he said.
 
According to Darmin, the only advantage of being a member of OPEC is the negotiation of world oil production and prices. Member of the House of Representatives Energy Commission Kurtubi predicts the OPEC agreement is just a tactic to influence market psychology without realizing it.

    Moreover, Indonesia was only asked to cut 37 thousand barrels per day. If we don't reduce production, it won't affect prices either," he said.

    But Kurtubi supported the government's decision to temporarily freeze OPEC membership instead of leaving permanently. This is because Indonesia still needs information on industrial developments and oil prices from OPEC. He advised the government to be aware of the potential for price increases.

Koran Tempo, Page-6, Friday, Dec 2,2016

Friday, December 2, 2016

Indonesia Temporarily Freezes OPEC Membership



    Indonesia decided to temporarily suspend membership in the Organization of the Petroleum Exporting Countries (OPEC). The decision was taken at OPEC's 171st Session in Vienna, Austria, Wednesday (30/11). 

    Energy and Mineral Resources (ESDM) Minister Ignasius Jonan said the freezing step was taken after the court's decision to cut crude oil production by 1.2 million barrels per day, excluding condensate. The session also asked Indonesia to cut about 5 percent of its production or around 37 thousand barrels per day.

    Even though the need for state revenue is still large and in the 2017 Draft State Budget it is agreed that oil production in 2017 will decrease by 5 thousand barrels compared to 2016, "said Jonan.

    Thus, the cut that Indonesia can accept is 5 thousand barrels per day. Jonan added that as a net oil importer country, this production capacity cut is not profitable for Indonesia, because the oil price will theoretically rise. With this membership suspension, Indonesia has twice frozen its membership in OPEC. The first freeze was in 2008, effective 2009.

    Indonesia decided to return to being active as a member of OPEC in early 2016. This temporary suspension is the best decision for all OPEC members. Because thus the decision to cut 1.2 million barrels per day can be carried out, and on the other hand Indonesia is not bound by the decisions taken, in line with Indonesia's national interests. Member of Commission VII of the House of Representatives (DPR) Kurtubi, supports the government's move to temporarily suspend membership in OPEC.

    This policy reflects the current condition of Indonesia. The government does not want to reduce lifting. Kurtubi said that Indonesia's crude oil production trend has never been achieved. This is due to the lack of exploration activities as well as mature domestic oil wells. 

    He said that without a decision to cut production at the OPEC session, Indonesia's oil production actually decreased from year to year. Without being told to reduce the production target, it is difficult to achieve because our production trend is down.

    He said that the temporary suspension of status did not mean that Indonesia would leave OPEC's membership. That way Indonesia can still cooperate with OPEC member countries.

    The Executive Director of the ReforMiner Institute, Komaidi Notonegoro, added that cutting or increasing oil production is one of the policies commonly carried out by OPEC. Indonesia must be careful in responding to this policy. He said the decision to freeze membership was a natural gesture.

    Komaidi said that his party has not seen the benefits of Indonesia's membership in OPEC. He said the benefits of being a member were limited to price information. According to him, the temporary suspension of status is not detrimental to Indonesia. This is because Indonesia can still cooperate with oil-producing countries outside of OPEC's membership, such as Russia and the United States. A country like this must be the concern of Indonesia to obtain oil and gas.

    Energy observer from Trisakti University Pri Agung Rakhmanto said the suspension of membership status allowed Indonesia to concentrate more on fixing oil and gas management in Indonesia. The government will often face OPEC decisions that differ from Indonesia's interests. He explained that OPEC's decision to cut oil production currently differs from Indonesia's interests, which in fact have to increase production to sustain state revenues.

    Pri Agung said that the membership suspension will have little effect on the downstream oil sector. This means that it can reduce direct access and cooperation with OPEC members in the procurement or import of crude oil and fuel oil (BBM) and the construction of refineries. 

    The domestic oil and gas industry, especially the upstream sector, will have no effect. Meanwhile, world crude oil prices rose about 8 percent in trading Wednesday US time after the major world oil producers who are members of OPEC for the first time since 2008 agreed to cut their crude production in order to raise oil prices which have continued to fall recently.

    This production cut, as quoted by Antara, would put OPEC's oil production below the current level of 33.64 million barrels per day. Non-OPEC country, Russia also agreed to cut oil production to 300,000 barrels per day. OPEC will meet with non-OPEC oil producers on December 9. 

    The West Texas Intermediate benchmark oil price for January delivery rose the US $ 3.93 to the US $ 49.16 per barrel. Meanwhile, the price of Brent oil for shipment in January rose the US $ 3.73 to the US $ 50.11 per barrel, or an increase of 8 percent. February shipments rose 8.8 percent to the US $ 51.48 per barrel. Kuwait, Venezuela, and Algeria agreed to monitor compliance with the OPEC agreement.

Investor Daily, Page-9, Friday, Dec 2, 2016

Friday, November 18, 2016

Lower Gas Prices Boost Petrochemical Growth


    The decline in gas prices is estimated to increase the growth of the petrochemical industry to 5.2 percent next year, compared to this year's projection of 5 percent. The decline in gas prices will reduce the selling price of petrochemical products by up to 5%, thereby increasing competitiveness. The decline in gas prices as a raw material is expected to encourage the petrochemical industry to expand on a large scale. A number of companies that intend to build a methanol plant will realize the investment plan.

    For example, currently, as many as two companies each from Germany and Japan are interested in building a petrochemical plant with a total investment of US$ 2 billion in Maluku. They plan to utilize the Masela Block liquefied natural gas (LNG). Apart from this, the petrochemical project in Bintuni Bay, West Papua, has the potential to be realized.

One of the investors in this area is LG Chemical, which plans to build a methanol plant with an investment of US$ 1.2 billion. Methanol can be processed into olefin products, ethylene, and propylene, to be further processed into polymer products, polypropylene (PP), and polyethylene (PE).

    PP and PE are plastics raw materials that are widely used. Currently, olefins in Indonesia are produced from the processing of naphtha, a derivative product of crude oil.

    Secretary-General of the Indonesian Association of Aromatic Olefins and Plastics (Inaplas) Fajar Budiono said that petrochemicals are the industry most ready to enjoy a decline in gas prices starting in early 2017. The price of gas as an energy source is planned to be set at US$ 6 per MMBtu at the plant gate. The price of gas as a raw material is expected not to exceed US$ 4 per MMBtu.

    He added that if the gas price was more than that number, the industry would have to recalculate. This price is the maximum price so that the industry can compete. He emphasized that if the gas price is below US$ 4 per MMBtu, the petrochemical industry can be developed in Bintuni Bay and Masela or in accordance with the Ministry of Industry's plan. That way, the petrochemical industry has the opportunity to develop methanol which can be processed into olefin and polymer products. Later more investors will develop methanol.

    Because, currently, a lot of methanol is still imported. By strengthening the methanol derivative industry, he emphasized, the industry could be more resilient from price fluctuations and changes in economic assumptions. Industry considerations at this time, he stated, the industry has two considerations in developing methanol to polymer products if it is built-in Bintuni Papua or in Masela in Maluku, the logistics price will be very expensive.

    For this reason, it is necessary to support the operation of the sea highway. If in the next four years the infrastructure is not ready, the factory will be built in Java. According to Fajar, the industry will see which one is cheaper, especially for the next four years. Ideally, the industry has a capacity of 450 thousand tons of olefin, so that it can be reduced to a polymer factory, namely 1.15 million tons of PP per year.

    Fajar assesses that this amount alone is not sufficient to meet the needs in Indonesia, which is estimated to reach 1.6-1.7 million tons in the next four years. Previously, Coordinating Minister for Maritime Affairs Luhut Binsar Panjaitan stated that the reduction in gas prices would be prioritized for three industries, namely fertilizers, petrochemicals, and steel. 

    The government will subsidize the three sectors to get cheap gas prices. Minister of Energy and Mineral Resources (ESDM) Ignasius Jonan stated that the gas price for the three industrial sub-sectors is a maximum of US$ 6 per MMBtu.

Investor Daily, Page-8, Friday, Nov 18, 2016

Wednesday, November 2, 2016

Revision of Oil and Gas Law Requested to be Accelerated


Industrialists await the birth of a revision of Law No. 22 of 2009 concerning Oil and Gas (UU Migas). The slow completion of the revised regulation is considered to have worsened the oil and gas investment climate, which is currently in crisis.

He admitted that the oil price which had reached below US$ 30 per barrel was a major blow to the upstream oil and gas industry, as well as the supporting industries. His party hopes that the House of Representatives (DPR) as the initiator and the government take quick steps in completing the revision of the Oil and Gas Law which is included in the National Legislation Program. The Indonesian Chamber of Commerce (Kadin) also hopes that the role of the private sector will be strengthened as a strategic partner of the government.

Regarding the aspect of oil and gas governance, Kadin requested that there be special rules that ensure the availability and development of infrastructure so that the distribution is evenly distributed. Moreover, in 2030, gas is predicted to make a major contribution to industrial development. The high price of gas makes production costs higher so that it suppresses competitiveness.

Deputy Minister of Energy and Mineral Resources (ESDM) Arcandra Tahar did not deny that upstream oil and gas activities in recent years were at their lowest point, Indonesia was in the bottom 15 of the 120 countries where oil and gas investment is located, which means that the domestic investment climate is not conducive. Member of the Indonesian House of Representatives Commission VII Satya Widya Yudha said the discussion on the revision of the Oil and Gas Law was expected to be completed in early 2017.

Media Indonesia, Page-17, Wednesday, Nov 2, 2016

Tuesday, October 25, 2016

Upstream Gas Price Can Be US$ 3.82 Per MMBTU


The Ministry of Energy and Mineral Resources (ESDM) stated that gas prices could drop to US$ 3.82 per MMBtu if the state did not take non-tax state revenues (PNBP) and income taxes (PPh) from gas trading. Malaysia has done this so that gas prices can come down to the consumer level.

The Directorate-General for Oil and Gas at the Ministry of Energy and Mineral Resources, I Gusti Nyoman Wiratmaja Puja, explained that there are two types of gas prices, namely the share of the revenue for the Cooperation Contract Contractors (KKKS) and the share for the state.

For the KKKS part, we must respect the applicable contract. According to him, the most flexible to be reduced is the share for the state. Namely, from PPh and PNBP, they only ask for approval from the Coordinating Ministry for the Economy. 

This method can reduce the gas price which is currently US$ 10 per MMBTU for end users. However, state revenues can also drop drastically. Malaysia has used that method, not taking part of the state. If the government does not take PNBP, the price of piped gas upstream could be US$ 5.01 per MMBtu.

But the state lost revenues of up to US$ 544 million or Rp. 7 per year (exchange rate of Rp. 13,000 per US dollar). If the state does not take all of the state's share including PPh, the gas price upstream will be US$ 3.82 per MMBtu. However, the government must lose US$ 1.26 billion or around Rp. 16.4 trillion per year. But there is another way, namely to reduce transmission and distribution costs by US$ 2.4 per MMBtu.

Kontan, Page-14, Tuesday, Oct 25, 2016

Monday, October 24, 2016

The Downstream Oil and Gas Sector is Arranged, the Upstream Sector is Still Constrained



    It has been five years since President Joko Widodo or Jokowi and Vice-President Ma'ruf Amin have ruled. In those five years, several policies in the energy and mineral sector were issued. One of the striking policies is the policy of removing subsidies for fuel oil (BBM).

President Joko Widodo

    Jokowi from the beginning of his reign had wanted to revoke the fuel subsidy, which the previous administration could not do, namely the Era of President Susilo Bambang Yudhoyono. Therefore, IGN Wiratmaja Puja, Director General of Oil and Gas at the Ministry of Energy and Mineral Resources (ESDM) said that the policy of removing subsidies was the Jokowi administration's most successful program. 

    
    Understandably, the policy on fuel subsidies is sensitive and has generated a lot of controversy in the previous era, namely the era of President Susilo Bambang Yudhoyono.

"The significant reduction in subsidies was carried out without any turmoil, and the economy continues to grow," said Wiratmaja some time ago.

    Jokowi's second program that is considered useful in the oil and gas sector is gas infrastructure development. In the Jokowi era, the construction of household gas networks (Jargas) and the construction of LPG refineries began with a 15-year investment of US $ 48.2 billion.

"It used to be hampered, now we already have a program and the construction is very fast. Energy utilization has also moved fast," said Wiratmaja.

    In addition to this policy, recently President Jokowi also announced a single price for BBM throughout Indonesia, whose program began in Papua. Besides, the government has also spread LPG to a wider community with a converter kit program for fishermen. Unfortunately, several good policies in the downstream oil and gas sector are not accompanied by good achievements in the upstream sector.


Blogger Agus Purnomo in SKK Migas

    Wiratmaja explained that until now the upstream oil and gas sector has not moved quickly because oil prices have fallen. This is reflected in the continuing decline in oil production. SKK Migas stated that last year's oil lifting was only 8230,000 barrels of oil per day (bopd) and this year it is only targeted to reach 820,000 bopd.

    Until mid-October 2016, the average oil production only reached 834,600 BPD, and gas reached 6,900 mmscfd.

"We hope that the lifting by the end of the year will be up to 820,000 BPD", said Taslim Yunus, Head of Public Relations of SKK Migas.

    Taslim also said, with the current decline in oil prices, the state revenue from the oil and gas sector was not optimal. The target oil price in the 2016 Revised State Budget (APBNP) is the US $ 40 per barrel. The average oil price is still at the US $ 38 per barrel. Wiratmaja admitted that the oil and gas sector regulations were not yet conducive for the upstream oil and gas industry. On the other hand, licensing of the upstream oil and gas sector has been trimmed from 146 permits, so far only six permits are sufficient.

    Apart from the matter of policy, Satya Widya Yudha, a Commission VII DPR RI member, said that Jokowi's policy to disband Petral, a subsidiary of Pertamina, also deserves appreciation. Satya assessed that Jokowi's implementation of policies in the oil and gas sector has not been optimal, such as the BBM to gas fuel (BBG) conversion program. This problem cannot be separated from the distribution of domestic gas which is constrained by the lack of infrastructure. As a result, a lot of gas is still being exported.

Kontan, Page-14, Monday, Oct 24, 2016

The development of the Masela Block is limited to correspondence


    It has been six months since President Joko Widodo changed the development of the Masela Block, from the original offshore LNG plant scheme to an onshore refinery. However, the Masela Block development plan still revolves around the revision of the plan of development (POD). 


In the latest news, the Ministry of Energy and Mineral Resources (ESDM) sent a reply letter to Inpex Corporation.

"Later Mr. Jaffee Suardin, the Special Staff of the Deputy Minister of Energy and Mineral Resources, will explain," Deputy Minister of Energy and Mineral Resources, Archandra Tahar, was reluctant to reveal the contents of the government's reply letter.

    According to information, the government's reply letter dated October 13, 2016, was signed by the Coordinating Minister for Maritime Affairs as well as the then Acting Minister of Energy and Mineral Resources, Luhut Binsar Pandjaitan.

Luhut Binsar Pandjaitan

    The government has not agreed on a single point put forward by Inpex Corporation. The government said that it still needs time to review and discuss the five points of Inpex's request.

    The five points of Inpex's request are an increase in the LNG refinery capacity from 7.5 MTPA to 9.5 MTPA, a 10-year contract moratorium, an internal rate of return (IRR) of 15%. Two other points, the matter of cost recovery during the exploration period and government licensing. The government is still targeting the Inpex Corporation POD submission to take place this year. We are trying to be as fast as possible.

Kontan, Page-14, Monday, Oct 24, 2016

Saturday, October 22, 2016

2017-2018, Indonesia LNG Excess Supply



The government stated that the supply of Liquefied Natural Gas / LNG in 2017-2018 will still be in excess or above national needs. The government noted that there was respectively an excess of LNG supplies of around 60 cargoes in 2017 and 2018.

Energy and Mineral Resources (ESDM)

Director-General of Oil and Gas at the Ministry of Energy and Mineral Resources (ESDM) I Gusti Nyoman Wiratmaja said that in 2017, there was an excess supply of LNG totaling 63 cargoes. Meanwhile, the excess supply of LNG in 2018 is predicted to increase, namely above 60 cargoes. 

    Excess supply occurred at the Badak LNG Plant in Bontang, East Kalimantan, and the Tangguh Refinery in Bintuni Bay, Papua. The government is negotiating the sale of 13 LNG cargoes for next year's allocation. Meanwhile, for the rest, the government is still looking for buyers.

"We want this to be sold to existing buyers. According to Wiratmaja, this excess LNG supply is not because the gas production sent to the refineries is too high. Gas production remains as planned. However, the government has not been able to find buyers willing to take the LNG. On the other hand, the government does not want to cut gas production upstream. He added that the excess supply has calculated the growth in demand for LNG for lyric power plants in the next two years.

Although, he admitted that the infrastructure for LNG recipients is still in the auction stage. Thus, this excess supply of LNG occurs purely because it cannot be absorbed domestically. With this excess supply, his party will not grant LNG import permits in 2017 and 2018. Import permits will likely begin to be granted by the government in 2019.

Previously, Vice President of LNG of PT Pertamina (Persero) Didik Sasongko said the company had prepared steps to anticipate a gas deficit of 1.5 billion cubic feet per day / BCFD in 2020. Pertamina has committed to supply LNG from other countries that can be brought to Indonesia. starting 2019.

"Like it or not, we will meet approximately 50% of the volume gap in production and gas demand," he said.

Cheniere Energy Inc

Pertamina has pressed a gas sale and purchase agreement (PJBG) with a subsidiary of Cheniere Energy Inc, namely Corpus Christi Liquefaction Liability Company with a volume of 0.76 million tons per year. The supply started in 2019 for 20 years. In addition, Pertamina has also contracted with Cheniere Energy with the same volume but started in 2018.

This supply will also last for 20 years. Not only that, Pertamina already has a commitment to supply 1.5 million tons per year from the world portfolio starting 2020. Pertamina has not received an LNG import permit. The government must have its own considerations. If it is simultaneously importing, it will close domestic gas production, ”said Didik.

But he is sure, in 2019, the gas supply he has prepared will be purchased by domestic buyers.

Investor Daily, Page-9, Saturday, Oct 22, 2016

Pertamina's Split Value 40% Is Very Economical



    PT Pertamina and consortium members, Exxon Mobil and PTT Thailand, are still evaluating the government's 40% split offer. However, Pertamina considered the offer to be very economical.


    Pertamina Upstream Director Syamsu Alam said that his party and consortium members are still evaluating the offer and plans for developing the East Natuna Block. 


the East Natuna Block

    Moreover, to date, not all members have submitted proposals regarding the terms and conditions for the East Natuna Block contract. Pertamina and the consortium have not been able to agree on the terms and conditions offered by the government.

"From Pertamina's evaluation, this figure may still be economical, but only for the AR structure, while the AP structure awaits the results of TMR (technology and market review).

    Syamsu explained that the evaluation took a very long time because the East Natuna Block development was carried out in stages. According to the plan, in the first phase, the development of the block on the Indonesian border will start from the work on the AP structure which has the dominant oil reserves. In the next stage, a gas-dominant AP structure with a carbon dioxide content of 72% will be worked out.

    Syamsu once revealed that oil production in the East Natuna Block could be done faster than gas. This is because oil development does not need to determine who the buyers are and the method of transportation, as in the gas business. 

    He admitted that gas development took a very long time because Pertamina had to ensure that it was commercialized. So if you want to have activity in Natuna immediately and withdraw other oil and gas blocks to be active immediately, that can be done by developing oil first.

    Moreover, the development of oil from oil and gas blocks in Natuna can later be carried out in an integrated manner. Currently, Pertamina and partners are working on a technology and market review / TMR for gas block production at the Indonesian border. Later, Fiscal for gas development will be based on the results of TMR which will be completed in 2017.

Energy and Mineral Resources (ESDM


    Previously, the Upstream Director of the Directorate General of Oil and Gas at the Ministry of Energy and Mineral Resources (ESDM) Tunggal revealed that the government had conveyed all the terms and conditions of the East Natuna Block offered to Pertamina and the consortium.

Some of the offers are split and signature bonuses. The split offered can be up to 40% for Pertamina because it is in accordance with the applicable regulations.
"Only Pertamina and the consortium are willing to bid,".

    Not only that, but the government also added a clause that the East Natuna Block production sharing contract / PSC could be revised once the TMR was completed. He said Pertamina partners were currently consulting with their head office regarding the government's offer.

"Exxon Mobil said that at the end of November it gave an answer. The acceleration of the development of the East Natuna Block is the government's desire ".

    Director-General of Oil and Gas of the Ministry of Energy and Mineral Resources I Gusti Nyoman Wiratmaja Puja said that the acceleration of the development of the East Natuna Block was necessary to safeguard Indonesia's sovereignty. This is because there have been attempts by other countries to draw their borders beyond the borders of the archipelago.

    We hope that in the next year it will be able to produce. Wiratmaja hopes that exploration activities can be carried out immediately in the East Natuna Block. Furthermore, this block can immediately produce around 7,000 to 15,000 barrels of oil per day (BPD). Oil reserves in the East Natuna Block are estimated at around 46 million barrels. Meanwhile, its gas reserves are 42 trillion cubic feet.

Investor Daily, Page-9, Thursday, Oct 22, 2016

Friday, October 21, 2016

Upstream Investment is Expected to be Enthusiastic



    It is hoped that upstream oil and gas investment in Indonesia will revive following the increase in oil prices in the last few days. The increase in world oil prices has an impact on the increase in Indonesian oil prices.

    Based on Bloomberg data on Thursday's trading (20 / October), the price of Brent oil was US $ 52.57 per barrel and WTI US $ 51.41 per barrel. This price is the highest in the last year. The increase in price was triggered by the decreasing supply factor in the United States. On February 11, 2016, WTI reached its lowest price in the past year, namely 26.21 US dollars per barrel.

    The lowest price for Brent in the past year on January 20, 2016, was 52.88 US dollars per barrel. Director-General of Oil and Gas at the Ministry of Energy and Mineral Resources (ESDM) I Gusti Nyoman Wiratmaja said that the increase in world oil prices has an impact on Indonesia's crude price / ICP.

    This condition is expected to stimulate upstream oil and gas investment in Indonesia. If the world oil price rises, practically the ICP will also increase. This means that state revenues will also increase. In addition, I hope this increase will stimulate upstream investment in Indonesia. This year, the government and the House of Representatives agreed to set the ICP at the US $ 40 per barrel. In the preparation of the 2017 State Budget (APBN), the ICP benchmark was raised to 45 US dollars per barrel.

    Based on data from the Ministry of Energy and Mineral Resources, the ICP in September 2016 amounted to 42.17 US dollars per barrel, up from the August 2016 price of 41.11 US dollars per barrel. The lowest ICP this year was 2749 US dollars per barrel in January.

"If the trend of world oil prices continues to rise, it will be in accordance with our projection in the 2017 State Budget, which is around the US $ 45 per barrel for the ICP".

F    or PT Pertamina (Persero), which everyday imports around 430,000 barrels of crude oil, this price increase does not really affect the company's finances. Moreover, it is difficult to predict the continuation of this rising price trend.

"The increase in oil prices is not too significant with the budget for imports. Pertamina imports oil with a futures contract system, at least for up to six months, ”said Pertamina Vice President for Corporate Communication Wianda Pusponegoro.

Wianda Pusponegoro

    At a time when the world oil price was around 100 US dollars per barrel, the need for foreign exchange to import crude oil and Pertamina's fuel oil was 150 million US dollars to 200 million US dollars per day. The fall in oil prices since late 2014 reduced the need for US dollars to import oil by more than 50 percent. State revenue An increase or decrease in ICP has a direct effect on state revenue. In 2015, with an average ICP throughout the year of US $ 48 per barrel, the contribution of oil and gas revenues was around Rp. 136 trillion.

    This figure is much lower than in 2014, which increased revenues of IDR 320 trillion with an average ICP of 96 US dollars per barrel. The drastic drop in oil prices has also made an upstream investment in the oil and gas sector in Indonesia less attractive. In 2015, upstream oil and gas investment spending was 15.34 billion US dollars, lower than in 2014 which reached 20.36 billion US dollars. Meanwhile, spending in the first semester of 2016 was the US $ 5.56 billion.

Kompas, Page-1, Friday, Oct 21, 2016

Gas Network Project and Trimmed Converter Kit



    The Ministry of Energy and Mineral Resources (ESDM) has cut several strategic projects. Trimming the project, in order to make budget savings next year.

    ESDM Minister Ignasius Jonan said that next year his party would cut the budget ceiling by Rp. 291.59 billion so that it would be Rp. 7.3 trillion for the budget in the 2017 State Budget (APBN). This budget cut would not interfere with the performance of the Ministry of Energy and Mineral Resources.

"What is being cut is as much as possible not disturbing the development targets for 2017, particularly the ESDM sector,".

    The cut budget is part of the savings and seeing the project work that will take place.

"What we can do about it is not ready, if possible, we will move the multiyear to 2018,".

    For example, the budget cuts for the construction of a household gas network project of 15,500 household connections (SR) worth Rp. 100 billion. That way, the network to be built from 69,200 SR to only 53,700 SR next year. It consists of 10,000 SR of Musi Banyuasin in Sumatra, Muara Enim and Pali 10,000 SR, Pekan Baru Riau 3,200 SR and existing 4,000 SR, Bontang development for 6,000 SR and existing 4,000 SR, Bandar-Lampung 10,000 SR, Mojokerto 10,000 SR and Samarinda 4,500 SR. .

    According to Jonan, the area built by the network must have an economical scale with a minimum development of 10,000 SR. In addition, the gas distribution must be available when the network has been completed. 

Wianda Pusponegoro

    Wianda Pusponegoro, Vice President for Corporate Communication at Pertamina, said that regarding the gas network, Pertamina has made a lot of additional investment.

"The additional budget in one location could be around Rp. 60 billion, the standard is for 4,600 connections,".

    ESDM also cut the budget for converter kit fishermen by 4,400 units, from the original 28,400 units to 24,000 units, from Rp 100 billion to Rp 55 billion. Then cut the budget, coal gasification plant with a value of Rp. 49.7 billion.

    Jonan also said that the Ministry of Energy and Mineral Resources will cut the budget for the waste generation to 39.29 billion, from the original Rp. 50 billion. Finally, the budget cut from savings in goods and capital expenditures at the Ministry of Energy and Mineral Resources unit amounted to Rp 52.6 billion. This budget cut is mainly for operational costs.

"We are trying to reduce Rp. 52 billion, this actual number could reach hundreds of billions," explained Jonan.

Kontan, Page-14, Friday, Oct 21, 2016