Operatorship Switch, Pertamina Directly Drills Well

PT Pertamina (Persero) said it would immediately drill wells once the management of the Rokan Block switched to Pertamina in August next year. This is to anticipate if the company cannot drill wells during the transition of the operatorship transition or management of the Rokan Block.

the Rokan Block

     Pertamina Upstream Director Dharmawan H Samsu said, his party had offered a joint drilling agreement (JDA in the transition period) to PT Chevron Pacific Indonesia as the existing operator of the Rokan Block, but until now, his side had not reached an agreement with Chevron.

PT Chevron Pacific Indonesia

As a precautionary measure, if there is no agreement, Pertamina has now started preparing well drilling in the Rokan Block. The target is, once the block management switches, the company will immediately drill a well.

"The options we are making now are more to make sure we have the readiness to drill in August 2021. This is the most basic option," he said in Jakarta.

Because, without an agreement with Chevron, Pertamina could not do the drilling in the transition period. Dharmawan acknowledged, with this condition, the condition when the transfer of management of the Mahakam Block could be repeated ie the production of the Rokan Block could go down very large.

Referring to Pertamina's data, Rokan Block's oil production could go down to 140 thousand barrels per day (BPD) if there is no drilling in the transition period. Because of that, his party tried to do well drilling without pause once the management of the Rokan Block turned to Pertamina. It has formed a special team that will prepare drilling in this Rokan Block, including the procurement of rigs and other equipment needed.

     Dharmawan explained, this was important because Pertamina's speed in preparing well drilling would greatly determine whether Rokan Block production could be prevented from continuing to fall.

"The reference is not how many wells can be drilled, but how fast we can procure the equipment and equipment needed," he said.

From discussions that have been carried out, there is indeed a target to drill 70 wells in the Rokan Block. According to him, the figure is a good reference to start drilling preparation.

"So every month we will review the progress of the existing preparations," Dharmawan said.

The drilling equipment procurement usually takes one year, so that the company still has enough time to remember since there are still 15 more months until the existing Rokan Block contract expires. Parallel to the preparation of drilling, it will continue to discuss with Chevron. He believes the government will also try to make the company be able to drill wells in the transition period for the management of the Rokan Block.

"But the most important thing is to ensure that when the transfer is managed, the drilling team is ready to go into the field. So there is no delay, "he stressed.

Earlier in a meeting with Commission VII of the Indonesian House of Representatives, PT Chevron Pacific Indonesia President Director Albert Simanjuntak said it would no longer drill wells in the Rokan Block because the contract would expire in 2021.

This policy is likely to last until the contract expires. Even though the Rokan Block has become one of the mainstays of the government to pursue the national oil production target.

Deputy Head of SKK Migas Fatar Yani Abdurrahman had said that if Pertamina could drill at least 70 wells in the Rokan Block this year, the country could get an additional oil production of around 20 thousand BPD. During its heyday in 1973, Rokan Block's oil production reached almost 1 million BPD.

  

     However, oil and gas block production continues to decline over time. In 2011, the Rokan Block still produced around 356.98 thousand BPD oil or contributed 39.56% of the total national oil production at that time 902.35 BPD. But referring to SKK Migas data, this year, oil production from the Rokan Block is targeted at only 160 thousand BPD.

Investor Daily, Page-9, Wednesday, March 11, 2020

Pertamina EP Will Drill 2 Wells in Papua

To support the 2020 performance target, PT Pertamina EP plans to start drilling two exploration wells in Sorong Regency, Papua, in the third quarter of 2020.

Nanang Abdul Manaf

Pertamina EP President Director Nanang Abdul Manaf said that at present his office was still in the process of acquiring land from the two wells. As for the location of Kembo-A, the company is currently taking care of a lease-to-use forest area (IPPKH) permit, because it has entered the forest area. 

    Meanwhile, for the location of Buah Merah-A until now it is still in the process of arranging a discussion with PT. HIP as the holder of the business use rights (HGU).

"The target is in the third quarter of 2020, we hope that the coronavirus problem will be finished in the second semester," he said.

In addition to the two wells, Pertamina EP will accelerate drilling of development wells to support the 2020 oil production target of 85,000 barrels per day (BPD) and natural gas 932 million standard cubic feet per day (MMscfd).

Nanang explained the plan was a company's strategy to realize production targets faster. Some drilling activities that have been carried out towards the end of last year, namely in Rantau Field, Sangasanga Field, Bunyu Field; and Subang Field.

"We also have waterflood inject wells in Jirak Village and Kusuma Arum (KUM) -Q01 exploration wells, both in South Sumatra," he explained.

Based on Pertamina EP's performance records, the oil production of a subsidiary of PT Pertamina (Persero) throughout 2017-2019 showed an upward trend in line with the increased activity in the well development of the company's development.

In 2017, oil production reached 77,154 barrels per day (bopd), rising to 79,445 bopd in 2018, and last year it increased to 82,213 bopd. Meanwhile, gas production was recorded at 1,018 boepd in 2017, an increase compared to 2016 which recorded 989 MMscfd, then 1,017 MMscfd in 2018, and 959 MMscfd in 2019 because buyers were unable to buy gas produced by the company.

Bisnis Indonesia, Page-23, Tuesday, March 10, 2020

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

The US $ 1.53 Billion JTB Project is Targeted to Be Completed on Time

SKK Migas states that it will oversee national strategic projects to be completed on time. One of them is the Jambaran Tiung Biru (JTB) project in Bojonegoro, East Java, which has an investment of US $ 1.53 billion targeted for onstream in August 2021.

Dwi Soetjipto

"The realization of upstream oil and gas projects that will support increased production, received special attention from the President of the Republic of Indonesia," said SKK Migas Head Dwi Soetjipto during a working visit to the Management Work Through (MWT) activity on Saturday (March 7).

Julius Wiratno

During the working visit, the SKK Migas Head was accompanied by Deputy Operations Julius Wiratno, Expert Advisor Satya W Yudha, Head of the Waras JTB Project Acceleration Unit Budi Santosa and SKK Migas Representative Chief Jabanusa Nurwahidi.

Nurwahidi

The JTB project is one of the four national strategic projects in the oil and gas sector determined by President Joko Widodo through Presidential Decree number 56 of 2018. The completion of the JTB project will also contribute significantly to the addition of national oil and gas production. The JTB project as a whole is valued at the US $ 1.53 billion and is expected to be streamed in August 2021.

the Jambaran Tiung Biru (JTB) project

"At the Limited Meeting on March 4, 2020, with one of the agenda of increasing national oil and gas production, President Joko Widodo has requested that the national strategic projects can be completed immediately. For this reason, SKK Migas will increase supervision so that the national strategic oil and gas sector projects can be completed at the designated time, even if they can be accelerated, "Dwi Soetjipto said.

Dwi added, the increase in supervision will be demonstrated by SKK Migas through field visits by SKK Migas management every weekend.

"This step is to ensure that the project can be completed on schedule and cost-efficient."

The JTB project is operated by Pertamina EP Cepu (PEPC). The JTB project in addition to making a large contribution to the addition of national gas, during project implementation has had a positive impact on the Regional Government and local communities. Based on SKK Migas data, as of February 2020, the number of workers absorbed in the JTB project was around 4,470 people.

In order to support the regional economy and increase the capacity of local entrepreneurs, SKK Migas has required the procurement of goods and services worth up to Rp 10 billion to be carried out by regional entrepreneurs, so that local entrepreneurs have the opportunity to develop and create jobs.

PEPC President Director, Jamsaton Nababan said during his presentation that the JTB project had a very big challenge because previously the contractor who built the EPC resigned, so the project activity had been stopped for several months.

"Thank you to SKK Migas for helping to overcome this difficult time, so that in the end the construction of the EPC JTB can be continued by a new contractor namely Industrial Engineering," he said.

To oversee the project to run smoothly, Pertamina intensified coordination with the EPC Contractor and placed supervisor inspectors in the vendor-owned workshop. This mechanism is to catch up with the target, and the project can still be built with the best quality and support the reliability of the JTB refinery operation when producing later.

Director of REKIN, Jakub Tarigan, in his report, said that since being appointed as an EPC contractor, his side had worked hard and intensive coordination with SKK Migas and Pertamina so that the project delays by February 2020 could be shortened by only 0.66%, or there had been an acceleration of 19, 3%.

"This achievement is extraordinary when the rain challenge is very extreme right now. We have prepared 9 pumps to ensure a maximum of 2 hours the project site is dry so that work activities will be normal ".

During a visit to the project site, the rain poured heavily, all contractors and subcontractors showed their readiness by making changes to the system so that work could continue to be carried out and all project human resources could be utilized.

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

The Rokan Block Transition is tiring

The Rokan Block transition process from PT Chevron Pacific Indonesia to PT Pertamina (Persero) will again be delayed, after Chevron refused the Join Drilling Agreement (JDA) option offered, Pertamina. JDA was one of the first options offered to concessionaires, in which Chevron drilling during the transition period at Pertamina's expense. This option was not accepted by Chevron due to economic considerations that were not attractive.

Nicke Widyawati

In a meeting with a number of chief editors of the mass media on Friday (6/3) night, Pertamina President Director Nicke Widyawati revealed that the transition period for the Rokan Block was a particular concern for Pertamina given the impending deadline for managing the block.

The Rokan Working Area (WK)

The Rokan Working Area (WK) management contract by Chevron Pacific Indonesia will end on August 8, 2021. In accordance with the results of the auction, the management of the WK will be carried out by Pertamina, effective from August 9, 2021 for the next 20 years, with a gross split scheme. 

Chevron Pacific Indonesia

    Nicke said it had made an effort in the transition period since last year through a number of options after Chevron adopted a policy of not allocating new investment funds.

The Rokan Block by Chevron

"We have offered joint drilling. So, we did the drilling with funding from Pertamina. However, that effort cannot be accepted, because as a concession holder certainly does not want anyone to enter, "said Nicke.

So far there have been great concerns from Pertamina regarding the Rokan Block transition. One of them is related to oil and gas production from the Rokan Block. Like the Mahakam Block which experienced a decline in production during the transition period, the same situation is predicted to occur in the Rokan Block.

The Mahakam Block

"The Mahakam Block is a problem in the transition period. Now if you look at the Rokan block, more or less the same thing will happen, "said Nicke.

Based on data on oil production profiles and the Rokan Block, a downward trend has been seen that has continued from 2012 to 2019. In 2012, oil and gas production from the Rokan Block was recorded at 338,500 barrels per day (BPD). The amount is produced from 615 wells for a year. Meanwhile, in 2019, oil and gas production from the block will only be 186,000 bpd, and there will be no drilling activity at all.

"It dropped dramatically," Nicke said.

Looking at the declining production profile, Pertamina estimates that without drilling activity at all until next year when the block is transferred to Pertamina, production is estimated to only have 140,000 BPD left. If this is the case, Pertamina claims that it will be difficult to restrain the decline rate.

"It's an old well that has been sucked up for 92 years. Surely the decline rate is extraordinary. This is happening. Reflecting on the Mahakam Block, in the last year, drilling in the block only occurred in six wells, out of which 60 should have been. "

Bisnis Indonesia, Page-23, Monday, March 9, 2020

Pertamina Chases Target

Unfortunately, the progress of refinery construction megaprojects is still slow due to various problems, especially the amount of investment needed. Not to mention, the margin of difference between production costs and selling prices is also relatively small. 

     Various efforts have been made by the government, ranging from providing incentives, tax breaks, ease of licensing, to providing locations. However, it was not also able to accelerate the completion of the construction of refineries in this country.

President Joko Widodo in TPPI Tuban East Java

President Joko Widodo also expressed his frustration several times. Until finally in December last year directly checked the Grass Roof Refinery / GRR Tuban construction project, East Java, which was integrated with PT Trans-Pacific Petrochemical Indotama (PT. TPPI). 

    At that time Jokowi even gave PT Pertamina (Persero) an ultimatum by giving 3 months to confirm the position and strategy of the Tuban Refinery development.

Pertamina was asked to accelerate the completion of the refinery project before the end of 2023. Based on Pertamina's data, from a number of projects accelerating the modernization of the existing refineries (Refinery Development Master Plan / RDMP) as well as the construction of new refineries (Grass Roof Refinery / GRR) with a total investment of the US $ 40-US $ 50 billion.

The Balikpapan refinery has progress of more than 13% and this year it is targeted to reach 40%. Furthermore, the development targets for the Balongan and Cilacap Refineries in Central Java are still 10% each. For the Cilacap Refinery, Pertamina in 2012 has actually cooperated with Saudi Aramco. However, as of March 2020, there was still no clarity about the cooperation plan.

Saudi Aramco

"We are still waiting for their offer [Saudi Aramco] as to what for this new scheme," said Pertamina President Director Nicke Widyawati.

Nicke Widyawati

The cooperation scheme has changed, bearing in mind that in nearly 3 years the agreement to form a joint venture between Pertamina and Aramco in the Cilacap Refinery project did not immediately meet an agreement related to asset valuation. 

    However, the cooperation options are certainly similar to the development of the Balikpapan Refinery. Overall Nicke is optimistic that the target of lifting 1 million barrels of oil per day (BPD) can be achieved 4 years faster than the original plan of 2030. Moreover, Pertamina continues to accelerate the construction of refineries, day and night, so that it can be completed faster and targeted.

"This optimism is because in 2026 most of the new refineries we have built are already in production."

Pertamina continues to explore various opportunities to acquire oil and gas blocks abroad and is targeting to drill 411 wells by 2020, an increase of 17% compared to the 2019 target of 351 wells. The company even allocated an investment of US $ 7.8 billion, up 84% compared to 2019 valued at the US $ 4.2 billion.

Fajriyah Usman

Pertamina Corporate Communication Vice President Fajriyah Usman added that by accelerating the construction of the refinery, the refinery capacity is targeted to be 2 million barrels so that it can meet domestic fuel needs from its own refineries.

"The target is for all RDMP and GRR megaprojects to be completed in 2026, and gradually refinery capacity increases starting in 2022," Institute for Essential Services Reform (IESR) Executive Director Fabby Tumiwa believes that the slow agreement with potential Pertamina partner investors is an obstacle to refinery development in addition to funding problems.

"What needs to be done immediately is the acceleration of agreements with partners for other refineries. In addition, EPC contracts for upgrading refineries, for example, Balongan West Java, and Dumai refineries in Riau Sumatra. " 

     However, he is optimistic that the RDMP project will start to look successful in 2022-2024, provided the agreement with Pertamina's partners does not back down. "The SOE and Pertamina ministries are trying on track, especially as the project is monitored by the President."

Various efforts have been made to realize the dream of building a new refinery. If the realization is still slow, maybe because it is indeed "not all happy with the project".

Bisnis Indonesia, Page-23, Monday, March 9, 2020