T

he regional administration of Bojonegoro, East Java, has finally issued permission to begin preparation for site work at the oil-rich Cepu block, operated by Mobil Cepu Limited (MCL), a subsidiary of US-based ExxonMobil.

The long-awaited “green light”, issued on Feb. 14, stipulates that PT Tripatra and Samsung Engineering could start preparation for engineering, procurement and construction (EPC) 1 at the Banyu Urip field.

Upstream oil and gas regulator BPMigas deputy for operation, Rudi Rubiandini, reported over the weekend that all related parties — the Bojonegoro administration, MCL and the EPC contractors — have agreed to begin EPC 1 projects worth US$746.3 million.

“Having been issued permission, contractors can begin working now. The block can start producing 165,000 barrels of oil per day [bpd] in July or August 2014,” he said.

As reported earlier, Tripatra and Samsung could not begin the EPC 1 projects following the issuance of a regional regulation obliging MCL to award construction work to local companies and build supporting facilities in an area outside the Cepu block concession area.

The regional administration refuses to issue construction permits before MCL fulfills all requirements stipulated in regional regulations.

Due to the permit problem, BPMigas projected that there might be a slight delay in the completion of the construction of production facilities at the Banyu Urip field, which currently produces around 22,000 bpd of oil.

MCL field public and government affairs manager Rexy H Mawardijaya confirmed that site work preparation permission had been issued and the EPC 1 contractors could now start mobilizing heavy equipment for projects to the Banyu Urip field.

“For the construction, we still have to wait for the issuance of the construction permit [locally known as an IMB] after we fulfilled six requirements demanded by the regional administration,” he told reporters.

“On Feb. 24, we will meet the administration to update the progress of the fulfillment of the six requirements. We hope the IMB can be issued as soon as possible,” he added.

The Cepu block is the key factor that will determine the fate of Indonesia’s target of producing 1.01 million bpd of oil in 2014. As of January, the country’s production still stood at 886,508 bpd.

President Susilo Bambang Yu-dhoyono has issued a presidential instruction as a legal basis from the government in combating all constraints that might hamper the country’s efforts to ramp up oil production.

The instruction has been issued to 11 ministers, the National Land Agency, governors and regional heads across the country. Among the ministers are the coordinating economic minister, the energy and mineral resources minister, the public works minister, the finance minister, the transportation minister and the environment minister.

For governors, President Yu-dhoyono requested that they supervise regional heads so that they do not issue regulations or policies that may hinder oil exploration and production activities as had occurred in Bojonegoro.