Saudi Arabia Increases Oil Production.

Saudi Arabia for the first time in the last decade announced a decision on increasing oil production capacity. The United Arab Emirates, its close partner at OPEC, followed a similar step.

Saudi Arabia, Wednesday, March 11, 2020, announced a decision to increase oil production capacity. This is the first time in more than a decade. This step was taken a day after Riyadh announced another step in the form of falling oil prices to be sent to the US. This action triggered the biggest oil price fall since the 1991 Gulf War.

The United Arab Emirates (UAE), a close partner of Saudi Arabia, took a similar step, namely to increase oil production capacity starting next April. Two The Gulf Arab state and members of the Organization of the Petroleum Exporting Countries have united against Russia, a non-OPEC oil producer, which rejects proposals for reducing world oil production.

The Saudi Arabian Energy Ministry has ordered oil-producing company Aramco to increase oil production capacity from 12 million barrels per day to 13 million barrels per day.

Saudi Aramco

"The company (Aramco) is exerting its utmost efforts to implement this directive as soon as possible," said Amin Nasser, CEO of Aramco.

There is no information about the time frame for implementing the policy. Increasing production capacity certainly requires billions of US dollars of investment. Aramco said the directives came from the Saudi Ministry of Energy. 

Prince Mohammed bin Salman (MBS)

    The energy policy of the royal state was generally controlled by the Crown Prince Mohammed bin Salman (MBS) and Energy Minister Prince Abdulaziz bin Salman who was still a blood relative of the MBS.

Currently, Saudi Arabia produces around 9.8 million barrels per day. This amount of production is an implementation of an agreement between OPEC and other oil-producing countries, including Russia, related to production cuts to reduce oil supply in the world market so that oil prices rise. 

    But since the end of last week, Saudi Arabia has taken dramatic steps that have triggered a collapse in oil prices. This was done after Russia refused to work together to reduce production. It is estimated, other OPEC member countries will follow the steps of Saudi Arabia.

By increasing oil production and lowering official prices for Asia, according to observers, Saudi Arabia wants to put pressure on Russia to dominate market supply and control prices. As a result of the oil price war caused by Saudi Arabia last Monday, crude oil prices dropped 25 percent, the biggest drop since the 1991 Gulf War. The price of Brent crude for May delivery fell 24 percent to 34.36 US dollars per barrel.

Selfie in Gulf War 1991

Moscow will raise the UAE, following Saudi Arabia's steps. The UAE national oil company announced Wednesday to increase supplies by more than 4 million barrels per day in April and increase production capacity to 5 million barrels per day.

The President Vladimir Putin

Moscow said Russian oil companies might also increase production to 300,000 BPD and could increase by 500,000 BPD. Russia indicated Tuesday it was ready to negotiate. However, Saudi Arabia insisted, there was little meaning if the negotiations would only confirm the inability to reach an agreement.

"Most likely the end of this crisis is the emergence of painful processes for several weeks or months until oil prices are low enough.

That way it can change the fundamental views of Moscow and Riyadh so that the two parties again reach a kind of compromise, "so the views of Eurasia Group, a political risk consulting company.

Stock market

Stock markets in Asia and Wall Street futures exchanges again depressed on Wednesday, March 11. Investors and market participants appear skeptical about Washington's stimulus package offer to fight the widespread Covid-19 outbreak, including in the United States, and the continued effects of the oil price war. 

   Many analysts say investors need to remain vigilant for further market volatility. This is because Covid-19 Wabab still raises risks to public health in many countries. If it drags on, the pressure on the global economy gets stronger.

Covid-19

The financial markets did seem to have recovered from a brutal global sell-off on Monday (March 9) triggered by a double shock, namely the collapse of oil prices and the worsening Covid-19 Plague. However, the increase appeared short-lived in early trading on Asian markets on Wednesday.

The stock market, US futures fell 1.54 percent and the MSCI index for Asia Pacific shares outside Japan dropped 0.04 percent. The Australian stock market is down 1.31 percent. Japan's Nikkei index erased earlier losses by rising 0.24 percent in early trade.

Earlier this week, US President Donald Trump said he would take "major steps" to defuse economic tensions caused by the spread of the coronavirus of the species. The headlines also focus on a discussion of the possibility of a payroll tax cut, a thing that helps lift market sentiment. However, the lack of continuation of talks on the topic has made some investors unimpressed and tend to be skeptical.

"We were promised something substantive from the Trump administration. If it hasn't come at this hour, there is a possibility of a delay, "said Michael Mc Carthy, chief market strategist at CMC Markets in Sydney Australia. "That's why the market has a negative tone.

From the perspective of global investors, there is still a lot of downside risk. " On Wall Street, the three major indices increased by almost 5 percent on Tuesday, one day after the US equity market suffered its biggest daily loss since the 2008 financial crisis.

Kompas, Page-5, Thursday, March 12, 2020

PHE is Ready to Boost YYA-1 Well

Pertamina Hulu Energi (PHE) plans to reuse the relief well of the North West Java (ONWJ) Offshore Block used to cover gas leaks in the Karawang Sea in the middle of last year. PHE's Managing Director, Meidawati said, the process of reuse is still ongoing if it goes well, then the impact on new products will be felt starting next year.

"The re-development of YYA-1 production is planned for 2021," Meidawati said.

Meidawati explained, her party was still continuing to study the estimated production at the well. Based on preliminary calculations, production is estimated to be in the range of 1,000 to 1,500 Barrels Per Day (BPD). 

     Previously Director of Operations at Pertamina Hulu Energi (PHE) Taufik Aditiyawarman said that the drilling was planned for three wells. So far they have conducted a number of studies such as studies of subsurface, drilling and platform cutting. The estimated investment for the plan to recover the well is around the US $ 30 million to the US $ 40 million.

"I don't know for sure, recovery, fixing, installing again, maybe the US $ 30 million-USS 40 million," said Taufik.

Director of Engineering and Environment of the Directorate General of Oil and Gas of the Ministry of Energy and Mineral Resources Adhi Wibowo revealed that the results of the gas leak investigation will be announced in the near future. Until now there is no clarity about the YYA-1 gas leak that caused oil spills and impacted on a number of areas.

"Soon it will be finished, not exceeding this month. It is being finalized," Adhi said.

The investigation effort is indeed in conjunction with the plan to re-use the YYA-1 Well. This is according to the development plan proposed by PHE. The investigation involved a number of experts, both from the Ministry of Energy and Mineral Resources and an independent team. Adhi said that after the investigation, the report would be directly conveyed to the Minister of Energy and Mineral Resources Arifin Tasrif.

For your information, this oil and gas well leak occurred on July 12, 2019, around 01:30 West Indonesia Time at the time of re-entry at the YYA-1 well in the re-perforation activity. Then a gas bubble emerged at the YYA Pavilion from the Ensco-67 rig located in the ONWJ offshore operational area. The YYA-1 well is a former YYA-4 exploration well that was drilled in 2011. This well is the leak.

Kontan, Page-14, Thursday, March 12, 2020

Ensco 67 Rig Blow Out in PHE ONWJ

Government Seriousness Awaited

The government has decided to take over management of the Rokan Working Area in Riau Province, after 50 Years of being controlled by PT Chevron Pacific Indonesia.

PT Chevron Pacific Indonesia

The government also appointed PT Pertamina (Persero) to become the new contractor in the giant oil and gas block starting on 9 August 2021. The decision was taken on the basis of business and economic considerations after evaluating Pertamina's proposal submission. Unfortunately, the transition process and Chevron to Pertamina are still hampered.

Facilities echoed by the government through the Ministry of Energy and Mineral Resources (ESDM) and SKK Migas were, in fact, unable to smooth Pertamina's steps. In the cooperation contract or the transition to managing the Rokan Block, there is indeed no policy that regulates a smooth transition process. On the side other, every contractor of a cooperation contract (KKKS) certainly only refers to the contract.

The Rokan Block

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

Chevron last drilled 91 wells in 2018. In 2019-2021, the company will no longer drill Rokan. This is considered reasonable, considering that the US oil and gas company would leave the legendary oil and gas block.

However, the impact of production decreased dramatically. After that, Pertamina offered alternative investment activities during the transition period, namely the Joint Drilling Agreement (options 1, 2, and 3 JDA). The JDA option is one of the options offered by Pertamina, in which Chevron drills during the transition period at Pertamina's expense.

Chevron

However, the option was rejected by Chevron because it was considered not in accordance with the economy. If so, Chevron has its own standards in drilling activities, while Pertamina also has its own counts. 

Nicke Widyawati

   Pertamina's President Director Nicke Widyawati expressed his concern, given the deadline for the transfer of management of the Rokan Block that is getting closer.

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

Pertamina considers Chevron's policy not to issue new investments during a transition period that is unwarranted. If referring to the Minister of Energy and Mineral Resources Regulation No. 24 of 2018 concerning the Mechanism of Returning Investment Costs in Upstream Oil and Gas Business Activities, the operator is obliged to invest in his Work Area and maintain the level of production until the end of the contract period.

The regulation issued on April 20, 2018 is the second revision of Ministerial Regulation Number 26 of 2017. It's just that, in Article 8 of the Minister of Energy and Mineral Resources Regulation No. 24 of 2018 it is explained that in the non-renewed cooperation contract, the contractor is required to settle the investment cost return . Obligations to settle the value of the return on investment costs included in the letter of determination of management of the new work area and new cooperation contract.

Drilling Certainty

With the rejection of the JDA Option by Chevron, Pertamina's Upstream Director Dharmawan H. Samsu assesses that the possibility of his fate will not be much different from the Mahakam Block. Moreover, Pertamina has not been able to ascertain whether drilling can be carried out this year or not.

"We are still talking about it and of course I cannot put the government first. Of course, the government is also trying to be able to do drilling, but the most important thing is to ensure that when the transfer is managed the drilling team is ready to go to the field. So there is no delay, "he said.

Sonitha Poernomo

When confirmed, Chevron's Corporate Communication Manager Sonitha Poernomo confirmed a number of things were being discussed, including the option to optimize production from this strategic asset.

"However, according to company policy, we cannot provide this information in detail," She said.

SKK Migas Deputy for Operations Julius Wiratno instead asked Chevron to drill in the Rokan Block, later with a cost recovery scheme.

"We will try to conduct drilling as soon as possible to support the achievement of production or lifting targets," he said

Teaching Staff of the Faculty of Earth Technology and Energy, Trisakti University, Pri Agung Rachmanto, said there was no party to be blamed in the transition process that was not smooth. He considered the JDA option offered by Pertamina would be difficult to achieve because the existing production sharing contract (PSC) does not regulate the smooth transition process.

According to. he, both parties must refer to the existing contract, so it would be natural if no agreement was found.

"The decline in production, due to a decline in investment and a smooth transition, may instead be said to be an inevitable consequence," he said

The founder of the Reforminer Institute highlights the regulations issued by the government regarding the transition period and the termination of oil and gas blocks. In practice, the policy is not easy to implement because each party refers to the existing contact clause.

"When the Ministerial Regulation is tried to be applied with the B to B approach, it will not necessarily take place unless the B to B agreement is reached," he explained.

With these conditions, it should be questioned again the seriousness of the government to take over management of the Rokan Block. The most important thing is whether the government is willing if the scheme also offers yields and investment opportunities for other portfolios. If there is an agreement there, it is possible that the Rokan Block transition process will run smoothly.

Bisnis Indonesia, Page-23, Wednesday, March 11, 2020

HCML Supports SKK Migas Apply e-CHSEMS Application

The application of the Electronic Contractor Health Safety Environment Management System (e-CHSEMS) received full support from Husky-CNOOC Madura Limited (HCML) as one of the cooperation contract contractors working under the control of SKK Migas.

The HCML HSSE Manager, Rockyanto Sasabone, revealed that the application of e-CHSEMS is an application of the information technology function and HCML supports the efforts to strengthen the data bank that shortens the procurement process of goods and services while maintaining the performance of Health, Safety and Environmental Protection (K3LL) of Work Partners.

Blogger Agus Purnomo in SKK Migas

The e-CHSEMS application was launched by SKK Migas Surabaya in early March. "General Manager and the highest leadership of the procurement and K3LL functions from around 42 KKKS agreed and committed to supporting the application of the e-CHSEMS Application," he explained.

Bhirawa, Page-10, Wednesday, March 11, 2020

Maluku Governor Supports the Acceleration of the Abadi LNG Project

Maluku Governor Murad Ismail supports the plan of the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) to accelerate the construction of the Abadi LNG Project, Masela Block in 2021. The government encourages the integrated liquefied natural gas (LNG) project to be integrated. it could start operating in 2026, sooner than originally planned in 2027.

the Masela Block

In its official statement, SKK Migas stated that the Maluku Governor's support was conveyed when he met with the Head of SKK Migas Dwi Soetjipto on Sunday (March 8). The meeting discussed a number of strategic plans for the development of the Abadi LNG Project, the Masela Block.

"In the meeting, at the same time, we discussed the acceleration of land acquisition and the readiness of the local workforce, because the planned infrastructure development for the Masela Block has begun in 2021," Maluku Governor Murad Ismail said in an official statement from SKK Migas, Monday (March 9).

He added, his party would not complicate the licensing process and would be involved in land acquisition efforts. Currently, he has also given permission to use forestry land that will be used for the construction of the Abadi Project production facility, the Masela Block, which is in the form of an LNG refinery.

At present, the Provincial Government through the Governor of Maluku has issued recommendations for 900 to 1,000 hectares of land. The land is expected to accommodate the construction of a gas processing facility of 9.5 million tons per year / MTPA.

"The interests of Maluku so that this national strategic project can take place because it will provide a multiplier effect (double impact) for the regional economy, as well as creating jobs. We must be optimistic that the Masela Block Project will have a positive impact on the people and the Maluku region, "Murad stressed.

Dwi Soetjipto

Head of SKK Migas Dwi Soetjipto revealed that the process of land acquisition and licensing is usually an obstacle in investment. However, the support of the Governor of Maluku and the acceleration of the development of the Abadi Masela Project will have a positive impact on the upstream oil and gas industry as a whole. This gives a signal that licensing and land acquisition are no longer an investment problem.

"So what is happening in the Abadi Project is expected to convince investors, especially world-class oil and gas companies to invest in technology and technology in Indonesia. Efforts to realize the production target of 1 million barrels per day (BPD) must be supported by a good investment climate, "he said.

At present, Inpex is still carrying out an environmental impact analysis (EIA) survey for onshore LNG refineries and Floating Production Storage and Offloading (FPSO) facilities. The EIA survey process has been carried out by Inpex since November 2019 and is targeted to be completed within the next year, after going through a survey in the dry and rainy season.

During the construction phase, Inpex must undertake a number of activities, including the construction and operation of underwater gas wells and the construction of the Subsea Umbilicals, Risers and Flowlines (SURF) facilities off the Arafura coast. Furthermore, Inpex also built a production facility, FPSO, underwater gas pipeline from the FPSO to a gas receiving facility (GRF) on land, and an LNG plant on land.

The Abadi project is projected to produce 9.5 million tons of gas per year in LNG and 150 million standard cubic feet per day / mmscfd for pipeline gas. Previously, Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif said the Abadi LNG Project was still targeted to operate in 2027.

However, his party encourages this gas project to operate faster in 2026, if it is indeed possible to do so. This is so that the country will immediately receive revenue from this project. To be able to speed up the operating schedule in 2026, Dwi explained that the final investment / FID decision must be completed by the end of 2021. 

     While project construction is targeted to begin in 2021 from the plan in 2022. In addition to working on Amdal, Inpex is holding an auction to carry out front end engineering design work. / FEED and FEED are targeted to be completed by the end of 2021.

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

7 Oil Producers Exceed Production Targets

Seven Indonesian oil producers (Cooperation Contract Contractors / KKKS) exceeded the 2020 oil production target set in the State Budget (APBN).

The seven oil producers are ExxonMobil Cepu Ltd (EMCL), Chevron Pacific Indonesia, Pertamina Upstream Energy ONWJ, Medco E&P Natuna, Pertamina Upstream Sanga-Sanga, Medco E&P Rimau, and JOB Pertamina-Medco Tomori Sulawesi LTD. Exceeding the highest target was achieved by Medco E&P Natuna which reached 119.6% of the APBN target.

"We continue to supervise and increase the intensity of coordination with KKS Contractors to discuss steps to improve upstream oil and gas operational performance and program implementation in line with Work, Programs and Budget (WP&B) in 2020," said Head of the Special Task Force for Upstream Oil and Gas Business Activities, Dwi Soetjipto, in Jakarta.

Dwi Soetjipto

Based on SKK Migas notes, until early March 2020, there are a number of KKKS that have not reached their production targets due to several reasons.

"There are KKKS that have carried out activities, but the results obtained are not as high as predicted or have not reached the target, for that we will evaluate the KKKS program and ensure that production is on target," Dwi said.

To monitor the investment and production activities of the KKKS, SKK Migas is calling at the same time finding a solution with the KKKS that cannot realize the production according to the target. 

    Regarding KKKS that have not yet reached the target, Dwi said, his party continues to conduct evaluations to ensure that the activities they carry out can support the achievement of production targets in the coming years, primarily in achieving the target of 1 million barrels.

In addition to the 7 oil producers, there are four KKKS gas producers that exceed the channeling targets, namely Pertamina Hulu Mahakam, ENI Muara Bakau BV, Premier Oil Indonesia and Petrochina International Jabung LTD. The highest production exceeding was achieved by Premier Oil Indonesia, which reached 121.2% of the APBN calculation target

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

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