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Local acts disrupt oil, gas output
Oil and gas companies are facing tougher challenges as more regional administrations fight over portions of hydrocarbon-rich areas across the archipelago
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Oil and gas companies are facing tougher challenges as more regional administrations fight over portions of hydrocarbon-rich areas across the archipelago.
This squabble has forced some companies to stop operations, a decision that will eventually affect their oil and gas output, which many prompt petroleum companies to consider leaving for good.
United Arab Emirates-based Mubadala Petroleum, which operates the Ruby field on Sebuku Island in the Makassar Strait, will likely delay gas production following recent arguments between South Kalimantan and West Sulawesi provincial administrations.
Both provinces claim to be the owner of the resource-rich island after exploration found a huge gas reserve there.
'Our concern is that both parties will take it to the streets and consequently disrupt activities at the block,' Gde Pradnyana, secretary of upstream watchdog SKKMigas, said in a text message.
The Ruby field is expected to supply around 30-50 million metric standard cubic feet per day (mmscfd) ' its initial capacity ' to nearby fertilizer firm PT Pupuk Kaltim in East Kalimantan in October this year.
The dispute between South Kalimantan and West Sulawesi provinces highlighted the escalation of bad sentiment toward the oil and gas sector among locals.
In May, PetroChina Int. Jabung Ltd., the local arm of the world's second-largest publicly listed oil and gas producer, PetroChina, was at odds with officials from East Tanjung Jabung regency in Jambi, Sumatra.
The local administration sealed-off access to 26 of 140 oil and gas wells belonging to PetroChina, demanding the company to make financial donations to the administration. The demand was made formal with the issuance of Bylaw (Perda) No. 55/2011.
The seal-off resulted in the loss of crude oil production of 433 barrels per day and gas output of 11.011 million standard cubic feet per day (mmscfd), according to PetroChina's data.
Last year, West Tanjung Jabung regency officials in Jambi stopped drilling operations in 18 oil and gas wells run by PetroChina.
In Maluku, the provincial administration is seeking 10 percent participating interest in the gas-rich Masela block located in the Arafura Sea, which is operated by Japan-based Inpex.
US-based ExxonMobile meanwhile returned the Gunting block in Jombang, East Java, to the government this year as residents rejected oil-drilling in the region.
'Previously they would send us [the local government] a letter to explain their protests. But now local officials are storming out of meetings with the Finance Ministry,for example,' said Gde, formerly SKKMigas operations deputy.
At the 37th Indonesian Petroleum Association (IPA) convention earlier this year, President Susilo Bambang Yudhoyono promised to resolve any disputes involving local administrations.
Land acquisition problems and permits have been the main obstacles for upstream companies, which have been seeing dwindling oil and gas output due the maturation of aging fields to a point of 830,000 barrels per day (bpd) from as high as 1.2 million bpd a few years ago.
Separately, Komaidi Notonegoro, an analyst with Jakarta-based energy sector think tank ReforMiner Institute, said local leaders perceived the central government as 'weak' due to legal uncertainty ever since BPMigas was disbanded by the Constitutional Court late last year.
'The government needs to do something because oil and gas companies will only grow weary about operating here,' he said.
The Energy and Mineral Resources Ministry's oil and gas chief, Edy Hermantoro, said separately that the central government would try to help local stakeholders understand the high-risk nature of oil and gas investment.
He, however, disagreed that these issues would hurt the investment climate.
'As long as they [investors] see us as a prospective country, rest assured they will continue investing,' he said.
