Pertamina Focuses on Increasing Oil Drilling

PT Pertamina (Persero) will focus on drilling activities in a number of oil wells to reduce the decline in oil and gas production. Pertamina is optimistic that it can contribute more than 70% to the national production target of 1 million barrels per day (BPD) in 2025.

"Towards Indonesia 1 million barrels, Pertamina gets around 753 thousand barrels or more than 70% of the national target will come from Pertamina," Pertamina President Director Nicke Widyawati said at a gathering with the Media Leaders in Jakarta.

Nicke Widyawati

According to Nicke, drilling was not only carried out on Pertamina's existing field but also on the transition block.

"There are four strategies carried out. If nothing, production decreases. We will increase it by drilling from around 300 to 411, and that will continue to increase. Pertamina's investment is 60% for this, "said Nicke Widyawati.

the Mahakam Block

Nicke explained, in the Mahakam Block, which is a transition block from the old contractor, in the last year before the contract period ended, only 6 wells were drilled, which should have been around 60 wells.

"When it was handed over to Pertamina, it had already been 57% declining rate to be able to hold the declining rate so that our products could increase slightly. We had to drill 122 wells per year. Imagine from previously only 6 wells, "said Nicke Widyawati.

Nicke Widyawati

Nicke revealed the following strategy to increase production was by conducting a seismic survey from off the coast of Bangka in western Indonesia to Papua in eastern Indonesia with a 30 thousand kilometer (km) track. This survey aims to find new reserves because there are 13-17 basins that have oil and gas potential. He said in the next 6 months the results could already be seen.

Another strategy according to Nicke is to increase oil production with the enhanced oil recovery / EOR method. EOR method with water, steam flood, chemical, and surfactant.

Nicke said that the 14 Pertamina EP and PHE working areas had implemented this method. Later the Rokan Block in Riau has the potential to conduct an EOR. It's just that Pertamina can enter the Rokan Block in August next year after the Chevron contract expires.

"Block Rokan is one of the potential ones," said Nicke.

Nicke revealed that activities in the upstream sector were able to increase the production of 1 million BPD as targeted by the government. But he said Pertamina accelerated the increase in national oil production to 1 million BPD.

"Pertamina gets about 70% of the portion of 1 million barrels," She said.

Rokan Block Production

Regarding the Rokan Block, Nicke admitted that he was worried that production levels would decline during the transition period.

"We have made efforts to make the transition period since last year, namely by offering Joint Drilling where drilling activities are carried out together, but with Pertamina funding. But that is not acceptable because as a concession holder it does not want anyone to enter. Legally the concession can be switched to Pertamina in August 2021, "explained Nicke.

In fact, according to Nicke, by regulation, there is a Minister of Energy and Mineral Resources Regulation No. 24 of 2018 which was previously Ministerial Regulation of 26 of 2017 which states that operators, contractors are required to invest in their working areas, and maintain production levels until the end of the contract period.

"So there is actually a contractor's obligation to invest. There is no reason to worry that this will not be replaced because the Ministerial Regulation states that all costs incurred will be replaced because of cost recovery, "said Nicke.

Blogger Agus Purnomo in SKK Migas

The Rokan Block is one of Pertamina's mainstays for increasing production. But in fact, oil production in this block is known to have dropped to 20,000 barrels per day (BPD). The Special Task Force for Upstream Oil and Gas Activities (SKK Migas) has monitored the operational transition process in the Rokan Block. However, SKK Migas stated that the transition process of the Rokan Block was very difficult and had caused a decline in oil production in this block.

PT Chevron Pacific Indonesia (CPI)

According to the Head of SKK Migas Dwi Soetjipto, the lack of drilling investment in the Rokan Block is the main cause of the decline in oil production. The contract period of the PT Chevron Pacific Indonesia (CPI) oil and gas Cooperation Contract (KKKS) in the Rokan Block will end in April 2021.

The Ministry of Energy and Mineral Resources (ESDM) has decided to hand over the management of the Rokan Block after the Chevron contract expires in 2021 to PT Pertamina's State-Owned Oil and Gas Holding Company, and to end the company's partnership with the Indonesian Government which has lasted for more than 90 years.

Meanwhile, Constitutional Economist Defiyan Cori believes, before ending all the provisions contained in the laws and other regulations that apply in Indonesia, especially related to investment drilling must still be carried out by KKKS, namely Chevron.

Chevron

The handover of the management of the Rokan Block to PT Pertamina has also gone through a transparent and professional bidding competition process and Pertamina has issued a signature bonus to the government in the amount of US $ 780 million or Rp10.92 trillion (dollar exchange rate of Rp. 14,000).

Defiyan said that the lack of drilling investment in the Rokan Block by Chevron caused a decrease in oil production of up to 20,000 BPD which meant a reduction in oil supply for domestic needs and would harm Pertamina's position because of the growing oil and gas deficit that President Joko Widodo had complained about if the supply shortages were met through imports.

"With the K3S contract period not yet over, investment in oil drilling until 2021 in the Rokan block must be undertaken by Chevron so that the absence of investment in 2020 does not result in a greater reduction in lifting production to more than 20,000 barrels per day. Chevron can be declared as having committed a default that is detrimental to Pertamina's finances and further disrupts the energy supply for the needs of the Indonesian people, "he stressed.

Therefore, the Rokan Block transition process must be completed by the Ministry of Energy and Mineral Resources and SKK Migas well through the facilitation of both parties (Chevron and Pertamina). Because, if the decline process gets bigger, it will become a problem for the fulfillment of production of Indonesia's oil consumption, in the future.

In fact, in this year's SKK Migas plan, oil production can only reach 705,000 BPD, while in the 2020 APBN, oil production is set at 755,000 BPD.

"It is very irrelevant and makes sense that Pertamina is the party blamed for the decline in Rokan Block production, while the KKKS portion is still at Chevron," he said.

The same thing was stated by an energy observer who is also Director of the Center for Public Policy Studies (Puskepi) Sofyano Zakaria. According to him, the government, in this case, the Ministry of Energy and Mineral Resources and SKK Migas must act decisively to Chevron as the operator of the Rokan Oil and Gas Block.

the Rokan Oil and Gas Block Chevron

"This decline should have been a concern of the government for a long time not just now. The government, in this case, the Ministry of Energy and Mineral Resources and SKK Migas, should understand this problem and must firmly behave towards Chevron which is still responsible for the Rokan block until 2021 "he said.

According to him, according to the regulation namely ESDM Minister Regulation Number 24 of 2018 which is a change from ESDM Ministerial Regulation Number 26 of 2017, it is stated that the contractor is obliged to invest in its working area and maintain the fairness of its production level until the end of the work contract period.

"In addition, it was stated that all investment costs will be replaced by the government (cost recovery). So, actually, there is no reason for Chevron not to invest in drilling because their work contracts are still ongoing until August 8, 2021, "continued Sofyano who is also the Chairperson of the Indonesian Energy Observer Association.

Noted, the production of the Rokan Block has dropped dramatically. In 2012, Rokan Block production was still 338 thousand BPD, and further in 2019, there were only 190 thousand BPD remaining. This is allegedly due to the Well drilling investment by the contractor, Chevron has declined dramatically. If in 2012 drilling was carried out in 615 wells but in 2015 it fell and only drilled 200 wells.

Whereas in 2016 there were 110 wells, and in 2019 there was no drilling for new wells at all. If this year does not invest in drilling wells, the production of the Rokan Block is expected to drop to 160 thousand BPD, and production in 2021, when handed over to Pertamina, is expected to decrease again to 140 thousand BPD.

Upgrading and Building Refineries

Meanwhile, in the downstream sector, Pertamina carried out refinery upgrading and upgrading projects and built new refineries. Refinery upgrading is carried out at the Balongan refinery in West Java, Balikpapan in East Kalimantan, Dumai Refinery in Riau, and Plaju in Palembang, South Sumatra.

While two new refinery projects in Bontang, East Kalimantan and Tuban, East Java refineries with a capacity of 300 thousand BPD each. All of the company's refinery projects are targeted to be completed no later than 2027.

Pertamina Megaprojects Processing and Petrochemical Director Ignatius Tallulembang said, upgrading the new refineries and refineries made the total capacity be 2 million BPD or double the current capacity. The refinery will eventually be able to produce petrochemicals of 12 million tons/year.

"We are the top players in the region. "Our refinery capacity is the largest in the region," he said.

Ignatius revealed, the modernization of refineries made processing capabilities more flexible, meaning that they were able to absorb various types of crude oil. He asserted that in 2025 Pertamina will be able to meet all the needs of fuel oil (BBM) in the country, including producing fuel with the best quality which refers to the Euro 5 standard.

"Fuel production is now around 650 thousand-700 thousand BPD. While consumption of 1.3 million BPD. So we import about 500 thousand-600 thousand BPD. There is no other choice we have to build refineries, "he said.

Meanwhile, based on data from the Central Statistics Agency (BPS), the oil and gas balance deficit in 2019 is US $ 9.34 billion. This deficit is better than in 2018 which reached the US $ 12.69 billion.

Biodiesel Program

In the downstream sector, Pertamina also supports the government's mandatory program related to the mixing of fuel oil (BBM) with FAME (Fatty Acid Methyl Ester) or vegetable oil from palm oil. This program is able to reduce oil imports. This mixing is called biodiesel because it mixes vegetable oil with diesel fuel.

At present 30% Biodiesel (B30) is already underway, which is Solar mixed with 30% FAME. Since 2017 has been mixing with 20% Fame (B20). Nicke Widyawati said the mixing or bioenergy program was dependent on the supply of raw materials for crude palm oil / CPO. The availability of CPO is currently able to support mixing of up to 50% or B50.

"The bioenergy program must look at the current CPO supply count of only B50. It needs additional plantation area (to get to B100), "he said.

He revealed, his party supports efforts to reduce imports of fuel with the biodiesel program 30% (B30) to B-100. Next year the Cilacap Refinery with a capacity of 6,000 barrels per day (BPD) will be able to produce B-100, also known as green diesel products.

"This proves that the Indonesian refinery is capable of B-100 and is the first in the world," he said.

Based on Pertamina's data, in the last five years (2015-2019), the compound annual growth rate (CAGR) of crude oil imports dropped by 9%, while product imports (gasoline, gas oil, aviation fuel) fell 4%. As for LPG imports, increased by 8% to meet the increase in national demand.

Nicke further proposed that the government impose an allocation obligation for the domestic market or Domestic Market Obligation (DMO) for palm oil (CPO) and price limits, such as the DMO imposed by the government on coal for steam power plants. With the DMO scheme, there is a long-term supply guarantee for volume and price.

"The price of output is still regulated using the rupiah and is locked. If it is not regulated (DMO) then there will be subsidies, "he said.

Investor Daily, Page-9, Monday, March 9, 2020

SKK Migas Appreciates Pertamina EP Production Increase

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) appreciates the operation and production performance of PT Pertamina EP as a Cooperation Contract Contractor (KKKS). In the last three years, Pertamina EP (PEP) has succeeded in increasing production at a time when global oil prices are likely to fall.

SKK Migas

"That's right for PEP in 2017, 2018,2019 we challenge and fully support them, they dare to raise production targets from what was planned. And the results are indeed production inclined from the previous year, "said SKK Migas Deputy for Operations Julius Wiratno in Jakarta.

Based on data, Pertamina EP oil production throughout 2017-2019 or under the leadership of President Director Nanang Abdul Manaf continued to increase. In 2017 oil production reached 77,154 barrels per day (BOPD), rising again to 79,445 BOPD in 2018, and last year to 82,213 BOPD. 

   Whereas gas production was recorded at 1,018 BOPD in 2017, an increase compared to 2016 which recorded 989 million standard cubic feet per day (MMSCFD), then 1,017 MMSCFD in 2019, and 959 MMSCFD in 2019 because buyers did not buy gas produced by Pertamina EP.

Julius Wiratno

Julius encouraged PEP to try to reduce the natural decline rate that was natural by identifying additional resources during development and drilling on time and paying attention to work safety. SKK Migas also plays a role in approving work plans and budgets (WP and B).

"When I coordinated the WP and B discussion to carry out the main tasks and functions as the head of the work program division, I was directly involved in the technical and economic discussions of each work program and encouraged more aggressively. With PEP KKKS we help and encourage identification of development wells candidates to be drilled and increase production directly, "he said.

Julius encouraged PEP and other KKKS to be more aggressive and facilitate facilitation in approving budgets and accelerating the implementation of work programs, especially development wells. In 2017, total PEP development wells reached 58 wells, increasing again in 2018 to 92 wells and in 2019 to 106 wells. 

     While work over wells was recorded in 194 in 2017, 175 in 2018, and 215 in 2019. He assessed the constraints of PEP operations because the scattered assets and working areas from West to East of Indonesia became very complex. Not to mention the added production facilities that are old so that they need maintenance efforts that require costs as well.

"Therefore, PEP management must be more daring to implement advanced technology to increase production and conduct debottlenecking businesses and to conduct good preventive and predictive maintenance," he said.

According to Julius, in the future PEP is more willing to take risks with the implementation of technology that is already available in the market, dare to be more persistent for innovation, and operational improvisation to be more efficient. Of course, you also have to be brave enough to take risks to make massive explorations. For some old fields that still exist, it might be possible to collaborate with technology provider contractors.

"Hopefully PEP is more advanced and victorious because I see a high commitment from the PEP leadership team," he said.

Djoko Siswanto

Secretary-General of the National Energy Council (DEN) Djoko Siswanto, assesses that Pertamina must continue to work to increase oil production in its own way. It would be nice if all the suggestions and input from all stakeholders to increase oil production were also considered to be implemented.

"In the last three years, PEP production has increased from year to year. In terms of cost, I see that there is actually something that can be saved so that profits can be greater, "he said.

Investor Daily, Page-9, Monday, March 9, 2020

SKK Migas Appreciates PEP Performance

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) gives appreciation to PT Pertamina EP as the Contractor Cooperation Contract (KKKS). Appreciation was given because PT Pertamina EP dared to raise its performance target when global oil conditions tended to decline.

SKK Migas

SKK Migas Deputy for Operations Julius Wiratno said Pertamina EP in the three years ended was challenged to raise production targets from what had been planned. Challenges answered by PEP with satisfying work results.

"In 2017, 2018, 2019 we provide challenges and full support to those who dare to raise production targets from what is planned. And the results are indeed very satisfying there tends to increase from the previous year, "he said.

Pertamina EP

Based on Pertamina EP's performance records, Pertamina EP's oil production during 2017-2019 showed an increasing trend. For example, in 2017, oil production reached 77,154 barrel oil per day (BOPD), rising to 79,445 BOPD in 2018, and last year it was 82,213 BOPD. 

    On the other hand, gas production was recorded at 1,018 barrels of oil per day (BOPD) in 2017, an increase compared to 2016 which recorded 989 million standard cubic feet per day (MMSCFD), then 1,017 MMSCFD in 2019, and 959 MMSCFD in 2019 because buyers were unable to buy gas produced by PEP.

An increase also occurred in the development of the number of wells. In 2017 the total PEP development wells reached 58 wells, then rose to 92 wells in 2018. Furthermore, it became 106 wells in 2019. For work, wells recorded 194 in 2017, 175 in 2018, and 215 in 2019, Julius also expects KKKS to try to reduce natural numbers declined naturally by identifying additional development wells and drilled on time and paying attention to work safety.

"We continue to encourage other KKKS to be more aggressive and accelerate the implementation of work programs, especially development wells. The activity of developing development wells at Pertamina EP also showed an increase, "he said.

The Secretary-General of the National Energy Board, Djoko Siswanto, assesses that Pertamina must continue its efforts to increase oil production in its own way in addition to focusing on maintaining production trends.

"I hope that PEP can work on marginal fields by involving incentives from the government. Because, in terms of cost, I see that there is actually something that can be saved so that the profit can be greater, "said Joko.

Radar Gresik, Page-6, Monday, March 9, 2020

2030, Indonesia Gas Production Reaches 12,300 MMSCFD

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) will increase national gas production to 12,300 million standard cubic feet per day / mmscfd. This will make Indonesia one of the world's major gas producers. 

SKK Migas

    Based on the national energy general plan (RUEN), gas production in Indonesia is expected to continue to decline due to a natural decline in the production rate of 20% per year.

However, during 2015-2019, SKK Migas was able to maintain gas production above the RUEN target. Last year, gas production was recorded at 7,254 mmscfd and lifting 5,923 mmscfd.

Dwi Soetjipto

SKK Migas Head Dwi Soetjipto is optimistic that national gas production will continue to rise going forward. This is after the discovery of spare parts of gas in the Sakakemang Block and the completion of the Masela Block revised plan of development / POD last year. Along with achieving the target of 1 million barrels per day (BPD) of oil production in 2030, gas production will also increase to 12,300 mmscfd.

"The completion of the Masela Refinery Project and the main upstream oil and gas project, as well as the discovery of other new oil and gas fields, will make Indonesia again one of the world's major gas producers," Dwi Soetjipto said.

SKK Migas has four strategies to increase national oil and gas production. In particular, SKK Migas will maintain the high level of existing production, the transformation of resources into production, accelerate enhanced oil recovery / EOR, and exploration to find large oil and gas reserves. At present, SKK Migas has identified 12 areas that have the potential to contain large amounts of oil and gas.

"With the details of 6 areas in western Indonesia, 4 areas in eastern Indonesia, and 2 areas in the deep sea," Dwi said.

Meanwhile, referring to data from the Ministry of Energy and Mineral Resources (ESDM), there will be an additional gas supply of 3,806 mmscfd in 20212017, namely pipeline gas 1,898 mmscfd and liquefied natural gas (LNG) 1,907 mmscfd. This gas supply comes from the 192 mmscfd JambaranTiung Blue Project in 2021 and the 400 mmscfd Corridor and Jabung Block in 2022.

In 2023, additional gas will come from the 300 mmscfd Sakakemang Block of Cendana and Alas Tua 60 mmscfd, the Kasuri Block 197 mmscfd, and the 100 mmscfd Indonesia Deepwater Development (IDD) Project. 

the Nunukan Block

   Furthermore, other projects contributing to boost Indonesia's gas production are the Nunukan Block 90 mmscfd in 2024, the Natuna Block 230 mmscfd in 2025 and 2028, the Tangguh Refinery Train3 725 mmscfd in 2022 and 2026, and the Masela Block 1,512 mmscfd in 2027. 

the Natuna Block

    According to Dwi, project completion main upstream oil and gas and Mega Masela Project will make Indonesia again become one of the world's major LNG producers.

"This can increase the contribution of upstream oil and gas to the increase in supply for the national industry and to supply world LNG needs so that it will further increase the country's foreign exchange," he explained.

He added, Indonesia had the opportunity to become a major supplier of global LNG again. For information, Indonesia has been the largest LNG exporter in the world since 1977. 

    However, along with the decline in national gas production and the government's policy to prioritize domestic gas utilization, Indonesia's contribution to the LNG market continues to decrease. However, this national gas production will not be entirely exported after increasing drastically.

"This supports the Government in increasing the competitiveness of domestic industries with the availability of gas supply," Dwi said.

Separately, Acting Director-General of Oil and Gas at the Ministry of Energy and Mineral Resources Ego Syahrial stated that the current government policy is to transform energy from oil dominant to gas dominant.

"In the future, gas will become the future of green energy along with renewable energy. The transition from fossil fuels to gas is a solution for today's global challenges, "he said.

In addition to encouraging increased gas production, his party is also increasing the development of gas infrastructure to meet the growing domestic gas demand.

"We also want to ensure and maintain that upstream gas activities remain attractive to investors," Close Ego.

Investor Daily, Page-9, Thursday, March 5, 2020

2020, Gas Marketing will be More Aggressive

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) said it would be more proactive in marketing national gas, both to the domestic and foreign markets.

Referring to the data of SKK Migas, lifting or gas distribution last year was recorded at 5,934 million cubic feet per day / mmscfd, below the target set in the 7,000 mmscd state budget. One of the causes of low gas lifting is the reduction in gas production following the cancellation of liquid / LNG natural gas supply by the buyer.

In 2020, Deputy Finance and Monetization of SKK Migas Arief S Handoko, his party does not want the gas production reduction or curtailment to happen again. For this reason, he will be more proactive in marketing domestic LNG production.

"Try to avoid curtail and try to sell as soon as possible," he said.

However, it will not necessarily sell LNG production to the spot market. He said he would still aim for a mid-term LNG purchase contract to obtain a very good price. This is to ensure that state revenues from LNG sales remain high. Therefore, the export market is not the only target of SKK Migas.

"If it cannot be sold abroad, it is offered to domestic partners, such as PT PGN Tbk and PT PLN (Persero)," explained Arief.

So far, all planned LNG production volumes have been contracted, aka no remaining cargo (uncommitted cargo). However, the projected amount of LNG production still has the potential to rise so that the possibility of uncommitted cargo in 2020 is still present.

This follows the plan of PT Pertamina (Persero) to boost gas production in the Mahakam Block. This oil and gas block is a supplier of the Bontang LNG Plant. Because when making the annual LNG delivery plan (annual delivery program), it does not accommodate the increased production from the Mahakam Block.

the Mahakam Block

"What is uncommitted is that there are about five cargoes because Mahakam has more production and has not entered the plan, because they [Pertamina] are also not confident," explained Arief.

In 2020, the company targets LNG production to reach 211.9 cargo standards, namely from Tangguh Refinery 122.3 cargo standards and Bontang 89.6 cargo standards. This production target is lower than last year which reached 252 cargo standards, of which Tangguh Refinery 120 cargo standards and 132 Bontang cargo standards.

Unfortunately, due to the fall in LNG prices on the spot market that pushed buyers to cancel cargo orders, the purchase of LNG in 2019 did not reach the target. As of December, LNG purchases were recorded at only 229.1 cargo standards, with details from the 117.4 Tangguh cargo standard and 111.4 cargo standard Bontang.

This LNG distribution did not reach the target either for domestic or export. In 2019, the target for LNG distribution into the country is 67 cargo standards and 185 cargo exports. While the distribution realization for the domestic market is only 60.5 cargo standards and 168.6 cargo exports. 

    Not only LNG, Arief added, his party would also strive for pipeline gas distribution according to the contract. The reason is, although domestic gas distribution is increasing, some of them are still under contract.

"If there is an allocation but a little absorption, it will be relocated to another buyer," he said.

Western Buyer

According to Arief, he also must find a buyer to replace the Western Buyer Extension (WBX). This is because the LNG buyer on Japan's west coast will probably not renew his LNG purchase contract from the Bontang refinery, which expires at the end of 2020. 

     He explained that negotiations with the WBX had been going on since 2019 and had not yet reached an agreement. Because the contract expires in late 2020, it will also look for other buyers.

"We are looking for a replacement for WBX if it is not renewed. WBX does not want to extend, but we are trying to find other buyers, "he said.

However, in 2020, he will still open negotiations with the WBX. Although he admitted, not all WBX members would agree to extend their contracts with Indonesia. Negotiations carried out last year were stopped because of the LNG price problem.

"We are still trying to be extended. Although not all members of the consortium will extend the contract. At this time, we will start renegotiating after getting the price reference from the sale at the end of 2019 yesterday, "explained Arif.

One option is that LNG, which is usually sold to WBX, can be sold to domestic buyers even at low prices. This is considered far better than selling the LNG to the international spot market at a low price.

For information, this LNG sales contract to Japan is with five companies on Japan's west coast or commonly called Western Buyers. This LNG supply is brought from the Bontang LNG Plant which is operated by Badak LNG. These five companies are Chubu Electric Co., Kansai Electric Power Co, Kyushu Electric Power Co, Nippon Steel Corp dan Osaka Gas Co Ltd

Investor Daily, Page-9, Tuesday, Jan 14, 2020

SKK Migas Spurs LNG Sales

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) will take aggressive steps in selling liquefied natural gas (LNG) while at the same time reducing production or curtailment in 2020.

Deputy of Finance and Monetization of SKK Migas Arief Setiawan Handoko hopes that the reduction in gas production (curtailment) will no longer be repeated in 2020. Because, one of the impacts of the curtailment in 2019 is the production performance of ready to sell (lifting) recorded only 5,934 million cubic feet per day (MMscfd), below the state budget target of 7,000 MMscfd.

"This year we are trying to avoid curtailment and sell the products as soon as possible," he said.

Last year, global LNG price pressures caused national LNG producers to cancel some of their production to avoid losses. Throughout 2019, SKK Migas successfully marketed 229.1 LNG cargo standards spread out with details of 168.6 cargoes to the export market and 60.5 cargoes to the domestic market. The LNG supply comes from 111.7 cargo Bontang refinery and 117.4 cargo Tangguh refineries.

Meanwhile, SKK Migas targets LNG production to reach 211.9 cargo standards, namely from Tangguh Refinery 122.35 cargo standards and Bontang 89.6 cargo standards by 2020.

This LNG production target is lower and the realization of production or last year's target. Arief added that the entire planned LNG production volume had been contracted or there were no remaining cargo (uncommitted cargo).

In addition to marketing LNG, SKK Migas also encourages pipeline gas distribution in accordance with the contract. Admittedly, domestic gas distribution is increasing, but some of them are still under contract. For example, such as the use of natural gas for the industrial sector, a contract of 1,910.58 BBTud was recorded, while only those that were realized.

A total of 1,600.12 BBTud, in addition, the electricity sector with contracts 1,151.22 BBTud, while 849.44 BBtud were realized. Likewise, for the fertilizer sector, gas contracts are recorded.

A total of 830.27 BBTud, while 748 BBTud was channeled, the export of piped gas was also recorded under the contract awarded with 723.99 BBTud from the contract of 809.85 BBTud. On the other hand, SKK Migas Head Dwi Soetjipto hopes that world LNG prices continue to improve. According to him in the last tender in 2019, the prices recorded had gone up by around 11.6%, with Brent valued at the US $ 8 per MMBTU.

"Indeed, sometimes prices are very low because of the situation. So the warming of Iran - the United States has caused prices to rise, "he said.

Meanwhile, SKK Migas also prioritized the domestic market after the contract with Westem Buyer Extension (WBX) ended in 2020. Arief Setiawan Handoko said that his party would offer it to domestic buyers before marketing it overseas. According to him, the step was taken to provide added value to the domestic industry.

"Domestic only. For example, selling cheap is okay, enjoying the local industry. "Instead of being sold on the cheap spot market abroad, it's better to sell cheap in the country," he said.

At present, SKK Migas continues to look for buyers to replace WBX. This was taken after LNG buyers on Japan's west coast were not expected to renew their LNG purchase contracts from the Bontang refinery, which expires at the end of 2019.

Actually, SKK Migas has made offers to WBX since last year, but until now there has been no agreement with these buyers. The WBX is a sales contract represented by five companies on the west coast of Japan. These five companies are Chubu Electric Co., Kansai Electric Power Co., Kyushu Electric Power Co., Nippon Steel Corp., and Osaka Gas Co. Ltd.

The LNG supply is brought from the Bontang LNG Plant which is operated by Badak LNG. Difficult negotiations with the WBX occurred regarding the LNG price agreement. Arief admitted that not all WBX members would agree to extend their contracts with Indonesia.

"When we will start renegotiating again after getting the price reference from the sale at the end of 2019," he added.

On the other hand, Wood Mackenzie, a global energy consultant, said market liberalization and low spot LNG prices had given birth to new players.

Principal Analyst WoodMac Asti Asra said lower spot LNG prices have made buyers look for ways to get cheaper access.

   According to him, in 2020, many companies will directly seek LNG directly to the spot market with short and medium-term agreements. On the other hand, gas demand growth in China has slowed by around 9% in 2019 compared to the previous year of 17%. The trade war is said to have a domino effect on the Chinese economy.

Woodmac Senior Manager Miaoni Huang said that with the power of the Siberian pipeline operating and having the first gas flowing from Russia to northern China, the need for winter LNG could be cut.

"In addition, domestic gas production is still increasing at a faster pace than in previous years. If this continues in 2020, gas imports will face slower growth. "

Bisnis Indonesia, Page-20, Tuesday, Jan 14, 2020

Government to Open Auction for Oil and Gas Block 2020

The government will hold a phase 1 auction of Working Areas (WK) this year in the first quarter. In this auction, the government will again offer the production sharing contract / PSC investment cost scheme, in addition to the gross split scheme (gross split), Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif said, both schemes PSC auction will be offered to investors in this 2020 oil and gas block auction.

"We have been able to use two oil and gas contract schemes. But we are currently fixing the cost recovery provisions. We justified the one that didn't quite fit, "he said in Jakarta.

Regarding the oil and gas blocks to be auctioned, Acting Director-General of Oil and Gas at the Ministry of Energy and Mineral Resources, Djoko Siswanto, added that he could not confirm the amount.

The reason is, that his party is still waiting for the results of his study with the Geological Agency and the Work Unit for Upstream Oil and Gas Business Activities (SKK Migas) related to which oil and gas blocks are ready to be auctioned. Oil and gas blocks that were not in demand at last year's auction will also be auctioned again in 2020.

Blogger Agus Purnomo in SKK Migas

"Yes [the oil and gas block] yesterday that was not in demand was auctioned again. Maybe the auction will be in the first quarter, "said Djoko.

Unfortunately, Djoko did not specify which blocks will be re-auctioned. For information, there are eight oil and gas blocks that are not in demand by investors at the three auction stages held in 2019. The details are West Kampar, West Kaimana, Kutai, Bone, East Gebang, West Tanjung I, Belayan I, and Cendrawasih VIII blocks.

Cendrawasih VIII blocks

The West Kampar Block, located on mainland Riau and North Sumatra, has oil and gas resources of 4.3 billion barrels of oil stock. West Kaimana Block The oil resources of this block are 2.44 billion barrels and 4.64 trillion cubic feet of gas.

Furthermore, the East Gebang Block has 6 prospects and 7 leads with an estimated 1.36 trillion cubic feet. This block is also adjacent to production facilities and infrastructure in the Gebang Block and Glagah Kambuna.

West Tanjung I Block has 6 leads with an estimated 150 million barrels of oil resources. This block is adjacent to several blocks that have good facilities and can be tied in with the Karendan and Tanjung Blocks.

The Belayan I Block has a proven basin with an estimated resource of 2.59 billion barrels of oil. In this block, there are at least three types of play, namely structural, stratigraphic, and combination, where 4 prospects and 10 leads are identified.

Belayan I Block is also adjacent to existing production facilities. The Cendrawasih VIII block in Papua is estimated to have gas resources of 3.84 trillion cubic feet and 1.02 billion barrels of oil. This block is located in a remote area and lacks facilities.

Investor Daily, Page-9, Monday, Jan 13, 2020