Gong Bencai (PT PetroChina International Indonesia)

PT PetroChina International Indonesia, a subsidiary of state-owned China National Petroleum Corporation (CNPC), has had a good run for the past 15 years in nine energy blocks across Indonesia. While it has set a target production rate of 85,000 barrels of oil equivalent per day (boepd) this year, the company’s fate has started to come into question with the contracts of three of its main production blocks set to expire within the next six years. The Jakarta Post’s Fedina S. Sundaryani recently spoke with PetroChina president Gong Bencai on what’s next for the firm. The following are excerpts from the interview.

Question: The One Belt One Road [OBOR] summit was recently held in Beijing, with President Joko “Jokowi” Widodo attending and calling for more investment in Indonesia. Are there any plans to boost this investment in the oil and gas sector?

Answer: This year, PetroChina will have been in Indonesia for 15 years. Indonesia has very good relations with China and Indonesia is also a very important country in the OBOR region.

The Chinese government has prepared more than 100 billion yuan (US$14.7 billion) in funds, and the Export-Import Bank of China and the China Development Bank have prepared more than 380 billion yuan as loans [for the OBOR initiative]. So why don’t we take advantage of this for Indonesia, that’s my idea from the top.

Also, after the OBOR summit, our parent company CNPC and the [Chinese] government held a meeting, in which CNPC decided to invest more in Indonesia. We decided that Indonesia is one of the very key investment destinations for CNPC. That is why the [Energy and Mineral Resources] Minister [Ignasius Jonan], SKKMigas [the Upstream Oil and Gas Regulatory Special Task Force] and [state-owned energy firm] Pertamina have visited our headquarters. We are discussing how to develop cooperation and how to bring more investment into the country in the oil and gas industry.

Your blocks are expiring. Is there a specific block you are looking to acquire?

Before, we only had nine blocks and they are mainly in the onshore upstream sector, but now we are thinking that we can do downstream and offshore too, so we have a bigger mission in the future.

Talking about cooperation, first we hope our blocks [operations] can be extended. You know our most productive blocks are going to be terminated in five to six years. The first one is Tuban [in East Java] and we hope the government will consider this and give us the opportunity.

Second, we are looking for new blocks. I know the government just launched seven or eight new blocks so our technical advisor will review the information. We hope that we can participate in the tenders.

For the eight new blocks we are conducting reviews because they have just given us the information about them.

The new blocks are being offered under the new gross-split scheme. Will that affect your evaluation?

I understand the [energy and mineral resources] minister wants to create more freedom for oil companies, allowing them to make fast decisions and improve production. So generally speaking, I like the gross-split scheme more than the previous PSC [production sharing contract] scheme. However, since the regulation is new, we will need more details to ground this policy. This is still up in the sky.

I also know some companies — such as Western companies and Pertamina, are making some noise, saying “Oh this is no good, why are you doing this? We calculated it and it seems no better.” We think the concept of it is good.

I believe the government will take these comments and give us more details. It must be a win-win for both.

Does that also include your decision-making regarding the extension of your expiring contracts?

Yes. I have told the minister: “In Indonesia, you are my boss. In China, I have another boss. So your decision is an order to me and we must follow.”

I cannot do the same thing as other companies and [complain] when the government has a new regulation. We will first follow the regulation and then we’ll discuss it.

How much are you investing in the upstream sector this year?

I don’t have the numbers. However, [our blocks] are going to expire so we have reduced our investment here. It’s normal but that’s why one of the newest regulations [Energy and Mineral Resources Ministerial Decree No. 26/2017] in which the government says that the new operator will cover [unrecovered costs] is a very good rule. It has a good concept and it is well considered, but it also needs more details to make the investing company sure that their money will come back.

With global crude prices still around $50 per barrel, how has that affected your business here in Indonesia?

Last year we recorded a very marginal profit. For the petroleum industry it’s long term, so we don’t care that for two or three years you have marginal profits or some losses. I think it’s normal because even though you’ve lost this year, why haven’t you mentioned that you made more money in 2012 to 2013 when [the oil price] was $100? Now for my company with $40 per barrel, we are still making money even though it’s marginal, it’s still positive.

Any situation we can understand as my superiors also support me as they have asked me to make our cake here [in Indonesia] bigger because we recognize that in the past 15 years we have maintained good production and the management from the government side is at a very international standard. Even though people say it’s very slow and there’s corruption, I still think the management is very much at an international standard.

How much has PetroChina prepared to acquire new blocks?

Actually, my boss hasn’t given me a fixed number. It depends on how many blocks we are interested in. We don’t have a limit. We have no ceiling.

Is PetroChina also interested in unconventional blocks?

Do you mean heavy oil? Yes, we have the technology to make a fire under the ground to burn the heavy oil to make it lighter [steam injection]. It has been successful in China.

How about deep-water projects?

We are interested in all the blocks. We don’t care whether it’s shallow, deep, offshore, onshore, gas, oil, conventional or unconventional. We have all the experience. In China, the daily production is more than 5 million [barrels of oil per day]. Also, we have plenty of experience internationally in more than 30
countries.

I have also heard that PetroChina hopes to dive into the downstream sector. Does it want to develop its own refineries or partner up with Pertamina?

It depends. The government has invited us to join in the construction of the Bontang refinery [in East Kalimantan] but we don’t have more information about this project. I only know that Pertamina is in charge and that total investment is around $14 billion to $15 billion.

I understand that the government is discussing with Sinopec [another Chinese state-owned oil and gas company] about this refinery. Sinopec is more focused on the downstream sector and they are more professional than us but we are also professional. We have more than 20 refineries in China and around the world.

If we have a gas block in Papua, for example, but there’s no market there, then maybe we will consider building a fertilizer plant. We can do that. The government has just invited us to develop a gas-based petrochemical park in Papua. We have talked about it and it’s something we want to do.

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