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Negotiations for E. Natuna still lagging
Block projected to be able to produce 7,000 to 15,000 bopd. Development of block may require an investment of US$20 billion to $40 billion.
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Natuna Islands. (-/-)
T
he product-sharing contract (PSC) for the gas-rich East Natuna block may not be signed anytime soon as negotiations between the government and the designated oil and gas consortium are still underway.
The government had previously targeted the signing to occur by September. However, the consortium – made up of state-owned oil and gas firm Pertamina, the local unit of US oil and gas giant ExxonMobil, and Thailand’s PTTEP – submitted their official proposal for the terms and conditions only three weeks ago, according to ExxonMobil Indonesia’s vice president for public and government affairs, Erwin Maryoto.
Erwin said that both parties were now discussing the impending PSC in a general sense, involving both oil and gas reserves.
“The consortium itself has already agreed upon the split scheme and location we want,” he said.
The East Natuna block, formerly known as D-Alpha, is located in the Riau Islands. With a total proven reserve of 46 trillion cubic feet (tcf ) of gas it is one of Asia’s largest gas reserves.
Based on a calculation, the block is able to produce 7,000 to 15,000 barrels of oil per day (bopd).
However, the gas field has a high CO2 level of 72 percent, the highest of all exploitation fields globally, which necessitates advanced technology to maximize extraction and sizeable investment for development. It is estimated to require between US$20 billion and $40 billion.
Since early this year, the government has been pushing for a quick PSC signing, partially as a sign of sovereignty. It has said that it aims to allocate the entire gas output from the bloc to domestic industries in a bid to spur growth in the downstream sector.
Since a gas production solution was still apparently far-off, the government had hoped that an oil production PSC would be inked first in order to start production within three years.
Energy and Mineral Resources deputy minister Arcandra Tahar has said that the government had expected one would be sealed midNovember. But as the talks are still proceeding at a snail’s pace, the timeframe is set to early next year.
Arcandra claimed that one major sticking point was determining whether East Natuna was a marginal field, meaning one unable to produce sufficient net income to make it worth developing at a given time.
A field can be seen as marginal due to various factors, including a drop in global oil prices, a lack of proper technologies to produce in such areas, a remote location or a lack of research.
Although the consortium appreciates the government’s enthusiasm for the block’s development, Erwin said that the 30-month principle of agreement (PoA) binding the three companies would not expire any time soon.
“The PoA stipulates that we complete a technical and market review by the end of 2017,” Erwin said.
“We cannot just sign a PSC straightaway due to the complexities that the 72 percent CO2 brings. At this rate, it’s more of a CO2 field than a gas field.”
Although Erwin declined to disclose the split scheme that has been proposed, Pertamina president director Dwi Soetjipto formerly said that the consortium’s ideal split with the government would be 60:40, in which the larger portion would go the former.
He reasoned that the more conventional scheme of 85:15, for which the government would have the larger portion, was not enough for a gas field that took up enormous investment.
