There is a Divestment Issue, the Masela Block Project Continues to Scroll

During the process of discussing the divestment of Royal Dutch Shell's participation rights in the Masela Block, a number of works related to infrastructure projects in the block are said to continue. 

the Masela Block

     Secretary of the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) Murdo Gantoro said, there were a number of stages in progress.

"At the moment there are field preparations related to studies to complete the Environmental Impact Analysis, prepare a final investment decision and land acquisition," he said.

Even so, Murdo did not want to specify whether the divestment discussion process would make sense to disrupt the course of the activity. SKK Migas also cannot comment further regarding the latest developments from discussions between Shell and Inpex Corporation as the operator of the Masela Block.

Inpex Corporation

 Maluku Governor Murad Ismail has submitted a Governor Decree concerning the determination of the location of Masela's liquefied natural gas refinery port to the Head of SKK Migas. The location is on Nustual Island, Lermatang Village, South Tanimbar, Tanimbar Islands, Maluku Province.

SKK Migas Deputy for Operations Julius Wiratno said, the area of ​​the transferred land had indeed reached some of the needs.

"There are still many more, for example to build LNG refineries, he said.

The location is determined to be approximately 27 hectares.

Kontan, Page-13, Wednesday, July 22, 2020

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

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

the Rokan Block in Riau

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

the Rokan Block

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

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

PT Chevron Pacific Indonesia

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

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

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

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

Satya W Yudha

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

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

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

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

Regional Participation

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

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

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

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

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

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

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

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

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

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

Looking for a Substitute Shell in the Masela Block

The desire of Royal Dutch Shell to flee from the Masela Block was so serious. Research institute Rystad Energy has even released research, Shell is eyeing funds of up to the US $ 2.2 billion from the sale of 35% of participating interest in participating in the Abadi Gas Field.

the Abadi Gas Field

Rystad Energy Readul Islam analyst said, even in good economic conditions, it is very difficult to predict the parties who are interested in buying Shell's participating shares in the Masela Block. 

     From its origin, global oil and gas players are likely to have shopped for current liquefied natural gas (LNG) exposures. He even considered Inpex Corporation could involve the Japanese government and the Japanese consortium to take over Shell's shares.

"But with Shell's value of US $ 2.2 billion, it is difficult to see Inpex, which is financially limited," he said, as quoted by energy voice dot com.

Executive Director of Upstream Consultant, Molyneux Advisors, Simon Molyneux, assessed that the Masela Block project has very high development costs and there are technical challenges that will be faced by potential buyers of Shell participation rights other than companies from Japan, according to him, it is possible that the Indonesian government will open up to investors come from China.

For investors from Japan, chances are, the Mitsubishi Group is also likely to be interested in the Masela Block, given Mitsubishi's lunge in general in Indonesia. Asia Pacific Research Director Wood Mackenzie Andrew Harwood said the plan to release Shell's participation rights in the Masela Block was more complex than the issue that had circulated about Shell's flee in 2019.

It is unlikely for giant oil and gas players to replace Shell in the Masela Block. According to him, there are several national oil and gas companies (NOCs) in the Asian region that have the opportunity to enter the Masela Block. The move is to market LNG to his country.

Rhea Sianipar

Shell Indonesia's Vice President for External Relations Rhea Sianipar was reluctant to answer the amount of the release of participation rights.

Rhea just said, "We cannot provide further comments regarding Shell's portfolio activities. There has been no comment from us," Rhea said.

Acting Corporate Communication Manager of Inpex Masela, Moch N. Kurniawan also declined to comment. But he ensured, his party remained focused on developing the Masela Block Abadi LNG project and was confident that the project would continue.

Nicke Widyawati

What about PT Pertamina (Persero)? When asked whether he was interested in taking Shell's shares in the Masela Block, PT Pertamina's Managing Director Nicke Widyawati only replied that his party was currently looking for opportunities to acquire oil blocks.

 "I am looking for oil, Masela is only gas," said Nicke Widyawati.

Kontan, Page-12, Monday, July 20, 2020

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

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

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

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

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

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

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

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

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

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

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

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

Cepu Block Production Encouraged to Reach 235 Thousand BPD

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) pushed the increase in production at the Banyu Urip Field, Cepu Block to 235 thousand barrels per day (BPD). This increase in production after the approval of the revised Cepu Block environmental impact analysis (Amdal).

Cepu Block

Acting Head of the SKK Migas Program and Communication Division, Susana Kurniasih, said that earlier this year, the production of the Cepu Block had been successfully increased to 220 thousand BPD. Now the oil and gas block production undertaken by Exxon Mobil Cepu Limited (EMCL) will be increased to 235 thousand BPD after obtaining a permit for it.

Exxon Mobil Cepu Limited (EMCL)

"We are coordinating with EMCL so that an increase in production of 235 thousand BPD can be realized. Hopefully, this business can be carried out soon, given that all the permits needed to increase production have been obtained, "he said.

The intended production increase permit is an Amdal amendment approval from the Ministry of Environment and Forestry (KLHK) and EMCL installation feasible approval (PLO) to support the production increase issued by the Directorate General of Oil and Gas. In addition, EMCL has also carried out a High Rate Test (HRT) to ensure production facilities are able to operate safely at the level of 235 thousand BPD.

According to him, HRT was implemented in 2019. However, the increase in production of the Cepu Block above 220 thousand BPD, could not have been carried out last year because it had not yet received the Amdal revision approval. Amdal at that time only allowed a maximum oil production of 220 thousand BPD.

"This year, the Amdal revision has been given by KLHK and the PLO has also been approved by the Directorate General of Oil and Gas to produce up to 235 thousand BPD," Susana said.

Optimization of production still takes into account aspects such as subsurface by applying good reservoir management in the Banyu Urip Field and Kedung Keris. In addition, increased production also takes into account aspects of security, reliability of production operations, and environmental impacts.

"It is hoped that the additional production from EMCL can help achieve the national oil and gas production target," he said.

Susan admitted, achieving the oil and gas production target this year was a challenge, especially with the Covid-19 pandemic and low oil prices. Many programs have been planned by oil and gas contractors, eventually, they have to be adjusted due to mobility restrictions. 

    As a result, several programs such as drilling, reworking, and maintenance of wells, and project construction were hampered. He mentioned EMCL as one of the oil and gas producers that we're able to achieve its production targets in the first semester, even exceeding the target of the State Budget.

"However, we are trying to maximize production from these work areas," Susana added.

Exxon Mobil Indonesia's Vice President Public and Government Affairs Azi N Alam expressed appreciation for all parties that have been involved in helping to accelerate the Amdal revision process and ongoing support for Banyu Urip Field operations in general.

"We continue to work closely with SKK Migas for the best efforts to increase the production of Banyu Urip and Kedung Keris by prioritizing security and the reliability of operations during the Covid-19 pandemic, "he said.

Until now, various optimizations in the Banyu Urip Project have proven to contribute more to Indonesia. One of them is the increase in reserves of the Banyu Urip Field by up to two times greater than the first plan of development (POD), from 375 million barrels to 940 million barrels. 

    In addition, Cepu Block oil production was also successfully increased by 33% from 165 thousand BPD to 220 thousand BPD. In fact, until the end of March, oil production from the Cepu Block reached 220,118 BPD from the target of 220 thousand BPD.

Investor Daily, Page-10, Friday, July 17, 2020

STIMULUS FOR TARGET CHASE

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

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

investment in the upstream oil and gas sector.

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

Dwi Soetjipto

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

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

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

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

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

the Rokan Block

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

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

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

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

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

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

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

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

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

Rokan Block

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

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

Satya Widya Yudha

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

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

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

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

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

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

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

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

Shell Ensures Downstream Business Continues

Shell Indonesia guarantees that its oil and gas downstream business in Indonesia will remain expansive amid news of the release of the 35% participating interest (PI) of the Shell Group in the Masela Block.

Rhea Sianipar

Shell Indonesia's External Relations Vice President Rhea Sianipar said investment activities in the downstream sector were still being carried out. Even Shell's downstream oil and gas business is very expanding. One example is the development of a Shell lubricant factory in Marunda, North Jakarta.

In this project, Shell is working on increasing the capacity of the lubricant plant. On the other hand, Shell ensures that the gas station business line also continues to be the focus of their business in Indonesia.

"Our retail business has grown to 116 Public Fuel Filling Stations (SPBU), not only reaching big cities, but also small cities in Indonesia," Rhea said.

But She was reluctant to comment on the news of the release of the 35% interest of the Shell Group Interest Participation in the Masela Block.

the Masela Block

"We cannot comment further on Shell's portfolio activities," Rhea said.

While the Inpex Masela Corporate Communication Manager, Moch N. Kumiawan said, currently it is focused on the planned development of the Abadi LNG project, Masela.

"We are confident that this project will continue and we are actively working to implement a development plan (POD) approved by the Indonesian government," he said.

Kontan, Page-10, Monday, July 13, 2020

Government finances Chevron investment

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

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

the Rokan Block

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

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

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

Fajriyah Usman

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

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

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

Wait PLN, Field Kepodang Ready to Stream Gas

PT Perusahaan Gas Negara Tbk (PGN) stated that gas production from Kepodang Field, Muriah Block will flow after the gas sale and purchase agreement (PJBG) with PT PLN (Persero) is signed. PGN is also optimistic that it will win an arbitration suit against Petronas Carigali Muriah Ltd (PCML) following the cessation of Kepodang Field gas production in September 2019.

PGN President Director Suko Hartono said that 80% of participating interest / PI ownership in Muriah Block which was initially held by PCML had been transferred to his party through Saka Energi Muriah Ltd (SEML). Thus, his party can produce Kepodang Field.

"So at least there is a gas flow of 10-20 MMSCFD (million standard cubic feet per day)," he said.

Kepodang Field, Blok Muriah started producing gas for the first time at 56 MMSCFD at the end of August 2015. The gas supply was channeled with the Kalimantan-Java (Kalija) I pipeline managed by PT Kalimantan Jawa Gas (KJG) to the Steam Gas Power Plant (PLTGU) Tambak PLN's Lorok in Semarang, Central Java.

Bloggger Agus Purnomo in Petronas Carigali Ketapang

However, in July 2017, Petronas stated that Kepodang Field was in force majeure because the reserves did not match the predictions. This field gas production was then stopped on 23 September 2019.

Suko added, his party had received permission from the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) to restart gas production at Kepodang Field. But he was not sure when the gas would start flowing because it was still waiting for the gas purchase agreement by PLN.

"This is what we are trying to do so that gas production can be in 2020-2021. We are waiting for the PJBG, "he said.

Previously, Saka Energi had sent an official letter to PLN regarding gas supply from Kepodang Field. Another commercial aspect that needs to be prepared is the Gas Transportation Agreement (GTA), where Saka will negotiate with KJG as a transporter.

PGN has been involved in the management of Kepodang Field, Blok Muriah from the beginning through SEML with 20% PI ownership. However, PCML and SEML have signed legal documents on the transfer of a participating interest or the Deed of Assignment (DoA) of Petronas participation shares at the end of January.

So, now SEML holds 100% interest participation in the Muriah Block. Even though the production has stopped since September 2019, the function testing activities for important equipment in the Kepodang Field are still carried out routinely. Over the past five months, Saka and Petronas have also made operational transitions, including conducting joint operations trials to keep operating facilities functioning properly. This is so that Saka can directly produce gas as soon as management switches.

Arbitration Lawsuit

At the same time, PGN Finance Director Arie Nobielta Kaban revealed, the lawsuit against Petronas Carigali related to the cessation of Kepodang Field gas production in the Arbitration International Chambers of Commerce (ICC) is still rolling. He is optimistic he can win this lawsuit.

"There is potential [to win], according to our lawyer, the gap is very large, around 70%, we won," he said.

The arbitration award is likely to come out in 2021. The lawsuit was filed because PGN also holds an 80% stake in KJG, in addition to the PI in the Muriah Block. Kaban explained the cessation of the Kepodang Field gas supply had an impact on the value of the KJG Kalija I pipeline.

"So, this pipe needs to be impaired in accounting because the book value is higher, which is the US $ 98 million," he said.

Previously, according to a letter from the Board of Directors of PGN on the Indonesia Stock Exchange (IDX) securities information disclosure in September 2019, the lawsuit was related to ship or pay obligations as stipulated in the gas transportation agreement between PCML, KJG, and PLN.

Because PCML ended the GTA with KJG and PLN earlier than the agreement following the end of the PJBG with PLN. PGN had revealed that based on the initial plan, the gas flowed through Kalija I Pipe reached 116 million MMSCFD. However, to guarantee the company's investment in the pipeline, a ship or pay scheme was established with a minimum limit of gas flowing at 104 MMSCFD.

The realization, since the Kepodang Field began production in 2015, the gas flowed through Kalija I Pipe has always been below the minimum limit. In 2015, the gas flowing was only 86.06 MMSCFD. Furthermore, Kepodang Field only releases gas of 90.37 MMSCFD in 2016 and 75.64 MMSCFD in 2017.

Investor Daily, Page-17, Friday, July 10, 2020

Inpex Committed to the Masala LNG Project

Inpex and Shell are still discussing the transfer of 30% of Shel's participating interest

Royal Dutch Shell (Shell) 

Inpex Corporation's management is committed and believes that the Masela Block project continues, despite news of the departure of Royal Dutch Shell (Shell) as the owner of 35% participating interest in the block.

Act Corporate Communication Manager of Inpex Masela Moch N Kurniawan said, at this time his side focused on preparing the development of the Abadi LNG project, Masela.

the Abadi LNG Gas Field

"As operators of the Abadi LNG Project and supported by the Government of Indonesia, we believe this project will continue. We are actively working on implementing the plan of development (POD) approved by the Government of Indonesia," said Kurniawan.

However, he did not want to detail the continuation of discussions between Shell and Inpex. Currently, Inpex as the largest shareholder in the block is looking for a replacement for Shell. 

    In the Masela Block, Shell has a participating interest (PI) of 35%. while Inpex Corporation controls 65% PI. Later, the local government will receive a 10% allotment of participation rights, which will be taken from ownership of Shell and Inpex.

The reason for Shell's withdrawal from the Masela Block development project was due to the condition of their cash flow which was affected by the corona pandemic (Covid-19). Shell decided to focus on other projects they were working on in Indonesia.

Previously, the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) said that the plan to transfer participation rights by Shell still had to obtain the approval of the Minister of Energy and Mineral Resources (ESDM).

SKK Migas Deputy for Operations Julius Wiratno said the government did not interfere in discussions between Inpex and Shell. However, SKK Migas is still guarding to ensure that the discussion does not hamper the implementation of the Masela Block project.

"All the PI transfer processes must be based on the approval of the Minister of Energy and Mineral Resources. Regarding valuation and all business discussions between investors, we are not involved at all," said Julius

He added, Shell did not reveal another reason for the decision to release the participation rights in the Masela Block. Shell only stated that the distressed cash flow condition was the main reason for the decision. The Masela Block Abadi Project this year has entered the approval stage of an analysis of environmental impacts (Amdal).

Until April 2020, the process had reached 45.33396 from the target of 47.96% for the month. The Masela Block Project has also obtained a Decree (SK) for the Determination of Land Procurement Locations for the Abadi LNG auction port on June 1, 2020. The refinery is planned to be built in the Tanimbar Islands, Maluku. 

    Inpex has begun the front end engineering design (FEED) process for onshore LNG projects, floating production and offloading (FPSO), export gas pipelines, and subsea umbilical risers; and flowline (SURF). The project is targeted to operate in the second quarter of 2027, a year later than the initial target.

Kontan, Page-13, Thursday, July 9, 2020