Govt to tighten control on oil and gas producers’ activities

The government promises to strengthen supervision over activities of oil and gas production sharing contract (PSC) holders to prevent an unplanned shutdown of their fields that may cause the country to miss its production target, a senior official reports.

The director general for oil and gas at the Energy and Mineral Resources Ministry, Evita Herawati Legowo, said that the ministry and upstream oil and gas regulator BPMigas had set up a special program to monitor activities of PSC holders.

“Actually, we already have the supervision program, but the implementation is relatively weak,” she told reporters at the BPMigas office on Friday evening. “Now we’re committed to optimizing supervision to prevent an unplanned shutdown as had occurred in previous years.”

She acknowledged that it was difficult for the ministry and the regulatory agency to closely watch all PSC holders’ activities due to the limitation of human resources. Thus, she continued, the two bodies would expand their supervision sampling by covering all major oil and gas producers with significant impact on the country’s production achievement.

“But, I ensure that there will be no change in PSCs due to strengthened supervision,” she said.

In 2010, according to BPMigas’s official data, Indonesia failed to reach its oil production target of 965,000 barrels per day (bpd) by producing only 954,000 barrels, 1.1 percent below the target.

The government blames the unplanned shutdown due to two incidents — in Riau province and East Java, which reduced oil supply from two major producers US-based Chevron and Korean-based Kodeco Energy — as the major causes of the failure.

In Riau, PT Transportasi Gas Indonesia’s (TGI) pipe channeling gas to a Chevron’s power plant leaked, forcing the oil company to temporarily shut down operations at several wells in the Duri field, which cost the country around 150,000 bpd in oil extraction.

In August last year, a cargo vessel also hit a Kodeco’s production facility north of Gresik, East Java. The accident forced the company to stop production and cost around 6,000 bpd in oil production.

Coordinating Economic Minister Hatta Rajasa said earlier that every 10,000 bpd decline in oil production would cause Rp 1 trillion (US$ 110.46 million) in state revenue loss.

BPMigas chairman R. Priyono said that the two accidents had a fatal effect on the country’s oil and gas production. As of today, he continued, Chevron had not resumed its productivity compared to the days before the accident.

“Some of the company’s oil reservoirs [in the Duri field] have cooled down due to the accident,” he explained.

BPMigas’s data shows that in 2010, five unplanned shut downs took place.

Priyono claimed that the number was half of that earlier in the year and he promised that his agency and the Energy and Mineral Resources Ministry would work harder to reduce the number this year.