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Jakarta Post
The Jakarta Post
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Deepwater projects still promising despite recent failures

  • Amahl S. Azwar

    The Jakarta Post

Jakarta | Wed, January 23 2013 | 12:01 pm
Deepwater projects still promising despite recent failures

Hope still exists for Indonesia in the establishment of deepwater hydrocarbon basins in its eastern region, despite several large oil and gas companies having given up on the task.

The government, however, needs to step up its game to lure investors and stop behaving as if those firms will continue to pour billions of dollars into exploration despite the nation’s troubled investment climate, said Indonesian Petroleum Association (IPA) vice chairman Sammy Hamzah.

“It’s up to the government to assure investors that exploring reserves in deepwaters is still promising,” he told The Jakarta Post.

The executive of the association, the members of which — mostly giant multinational firms — account for about 90 percent of Indonesia’s oil and gas production, was commenting on the recent move of several firms to hand back their blocks to the government after years of exploration.

Major players such as US-based ExxonMobil and Norway’s Statoil, among the first firms to tap into the deep-water projects, decided to return their blocks in the Makassar Strait in Sulawesi after discovering that most of their exploration wells turned out to be “dry holes”.

US-based ConocoPhillips also returned its Kuma block in the Makassar Strait as the firm deemed the block uneconomical.

In the past three years, Indonesia’s oil and gas investors searching for more reserves have lost US$2.4 billion with no discoveries of profitable hydrocarbon basins. Around 70 percent of that figure is from deepwater projects.

Last week, President Susilo Bambang Yudhoyono highlighted that Indonesia would still need foreign oil and gas firms with huge capital to unearth more hydrocarbon reserves amid the country’s declining oil
production.

International energy companies such as US-based Chevron and France-based Total SA account for around 70 percent of Indonesia’s oil output. Around 40 percent alone comes from Chevron.

Indonesia’s oil production in January this year of 830,000 barrels per day (bpd) is the lowest output the country has experienced.

Indonesia’s officials, however, remained optimistic that there would be more discoveries of oil and gas reserves in eastern parts of the archipelago. SKKMigas operations deputy Gde Pradnyana insisted that the recent failure of several big firms did not signal the end for deepwater projects in Indonesia. The country, he said, would take advantages even from the failed exploration wells as it would receive more data from the firms that could be developed for future projects.

“Take the Gendalo field in Makassar Strait. Even though ExxonMobil did not find anything from the field, when Chevron took over its contract, it managed to find profit-making reserves,” he said.  

Earlier this year, Chevron discovered that the Gendalo field had the production capacity of 700 million standard cubic feet per day (mmscfd) of gas and 20,000 bpd of oil.

Gde also highlighted the successful discovery of the gas-rich Masela block in the Arafura Sea by Japan’s Inpex as an example that deepwater in the eastern archipelago was still promising.

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