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Big deepwater projects pending approval
The operators of two proposed deep-sea gas development projects worth billions of dollars are awaiting the governmentâs approval of their request for a longer contract period before they can go further
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he operators of two proposed deep-sea gas development projects worth billions of dollars are awaiting the government's approval of their request for a longer contract period before they can go further.
Certain contracts will expire for Chevron Indonesia's Indonesia Deepwater Development (IDD) project and Inpex Masela Ltd.'s project in the Abadi field in the Masela block sooner than their economic assumptions.
Chevron's IDD project involves a number of different production sharing contracts (PSCs), including the Makassar Strait PSC that will expire sooner than the others.
Therefore, the company is asking the government to extend the period of that particular contract from 2020 to 2028 in order to match the others, according to the Upstream Oil And Gas Regulatory Special Task Force's (SKKMigas) deputy head for planning, Aussie Gautama.
Meanwhile, Aussie said that Inpex also sought 20 additional years for the Masela block project, hoping to extend the contract from 2028 to 2048.
He said discussions were underway at the Energy and Mineral Resources Ministry to reach a decision on the two issues.
'The possibility is that part of the Makassar Strait PSC to be developed for the deepwater project will be carved out, while the remainder will remain under a contract until 2020,' said Aussie.
'Meanwhile, if the Masela's Abadi gas delivery starts in 2018, the economic calculations won't be good because delivery will only last until 2028, when the contract expires. They need more than 10 years to produce from the field.'
However, the current regulation allows for a plea for contract extension to be submitted only within 10 years before the contract expires ' 2018 at the earliest in the case of the Inpex Masela project.
Aussie said any contract extension regarding the IDD project had to represent a benefit for Indonesia.
'The field at the Makassar Strait is perhaps only 5 percent of the whole IDD project,' he said.
'It is impossible to stop the [entire] project due to this matter. Everybody is working hard to make this project work because [...] around 70 percent of the gas produced will go to the country.'
Aussie added that the IDD project could contribute up to US$9 billion to state income, while declining to reveal the Abadi field's contribution, which could be higher than the former due to its bigger reserves.
Inpex's Abadi field is expected to have 6.05 trillion cubic feet (TCF) in proven resources.
Energy and Mineral Resources Deputy Minister Susilo Siswoutomo said no changes, including in the aspect of design, had been made regarding the two projects.
Under a plan of development (POD) approved in 2011, Inpex is planning to build a floating liquefied natural gas facility with a capacity of 2.5 million tons per year. The $5 billion facility is expected to start production by the end of 2016.
Under a separate POD approved in 2008, the $7 billion IDD project would be conducted through four PSCs, namely Ganal, Rapak, Makassar Strait and Muara Bakau.
The four blocks have five gas fields ' Bangka, Gehem, Gendalo, Maha and Gandang ' in which Chevron Indonesia would drill 28 undersea wells. The production of the fields will be integrated with two floating production units (FPU) and a subsea tie-back, which is a connection from a newly discovered field to an existing production facility.
Chevron Indonesia spokesman Dony Indrawan said the company continued to work with the government to gain approval upon a final investment decision (FID) expected for later this year.
The IDD project is now also in the spotlight after a document from a Corruption Eradication Commission (KPK) trial showed that SKKMigas deputy for business affairs Gerhard Marteen Rumeser testified that Democratic Party lawmaker Sutan Batoegana instructed the regulator's former head, Rudi Rubiandini, to favor Sutan's company, PT Timas Suplindo, for a tender of the project.
In response, Dony said the tender, which was for the Subsea Installation Contract (SIC) for the IDD, was held in 'compliance with all Indonesian regulations and law, and in an open and transparent way consistent with Chevron's rigorous global tender process'.
Exploration activities in the country are moving from the west, where most traditional oil and gas deposits lie, to the east, which has prospective resources. The abundant resources in eastern Indonesia come with great challenges, however, as they mostly stretch deep down under the sea, creating high risk and high-expenditure business.
According to the ministry's official website, the government has so far approved 71 contracts of oil and gas deepwater development projects. Of the total awards, PODs have been approved for projects in the North Jambu Aye, Abadi and Jangkrik fields, and the IDD.
