Securing Bojonegoro’s final nod, Banyu Urip’s oil now within reach

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The regional administration of Bojonegoro, East Java, has issued a permit for the construction of seven production facilities in the Banyu Urip field of the oil-rich Cepu Block, completing the set of permits needed for the field’s full development after months of tough negotiations.

“The regent has just signed the permit, and a BP Migas official will soon go to Bojonegoro to get it,” upstream oil and gas regulator BP Migas’ representative office chief Elan Biantoro told The Jakarta Post on Thursday.

BP Migas spokesperson Rinto Pudyantoro said that the regent’s approval had sealed the deal on the full development of Banyu Urip oil.

Rinto said that besides the seven production facilities, supporting facilities such as sporting centers, clinics and other community centers would be built for local residents.

Earlier, the regional administration had refused to issue construction permits unless the operator for the field, Mobil Cepu Limited (MCL), a subsidiary of US-based ExxonMobil, fulfilled six requirements. The Bojonegoro administration also said that of 29 buildings MCL proposed, seven were in violation of the regency’s spatial planning bylaws.

The Bojonegoro administration required a village land swap, the relocation of a school building and the construction of a soccer field, among other things.

A representative for the Bojonegoro administration remarked on a meeting last week that the most important thing the local administration wanted was the project to benefit local residents.

The Cepu Block, in which the Banyu Urip field is located, is expected to be crucial for meeting the government’s oil production target of 1.01 million barrels per day (bpd) in 2014. As of January, the country’s production stood at 886,508 bpd.

Currently, the Banyu Urip field produces 22,000 bpd, but the construction of the seven production facilities is estimated to boost production capacity to 165,000 bpd.

The construction of production facilities in the Banyu Urip field is considered to be a huge, highly complex undertaking.

Rinto said that the project incorporated the development of 49 wells that would be connected to three harbors, a processing plant and a 95 kilometer-long pipeline that would be used to transport the oil to tankers and floating storage and offloading (FSO) units.

The contract for the construction of production facilities, worth a total of US$1.3 billion, has been separated into five engineering, procurement and construction (EPC) projects. The permit for first EPC was issued on Feb. 14, this year.

The delay in obtaining the necessary permits will likely cause MCL to miss 2014 deadline. However, the contractor remained optimistic that the projects could be completed on schedule.

Last week, the Energy and Mineral Resources Ministry raised concerns about the project’s delay. Deputy Energy and Mineral Resources Minister Rudi Rubiandini said that if no progress had been achieved in negotiations, the ministry would arrange for the concerned parties to sit down and discuss the issue.

“We cannot just sit around, given the delays of this project. We will bring the regent, the governor as well as officials from BP Migas to the President if we must,” he told journalists on last week after the Friday prayer at the ministry’s office in Central Jakarta.