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pstream oil and gas regulator BPMigas says that Cepu block operator Mobil Cepu Limited (MCL) cannot start developing the Banyu Urip field in Bojonegoro, East Java, due to permit delays.

Bojonegoro Regent Suyoto previously issued a regulation requiring MCL, a subsidiary of US-based ExxonMobil, to award engineering, procurement and construction (EPC) contracts for the field to local companies, despite previous awards to companies outside the regency.

“The regulation also obliges MCL to build supporting facilities, such as offices and accommodations for workers in certain places outside the area that was previously agreed to by the company,” BPMigas spokesperson Gde Pradnyana told reporters on Friday.

The regent’s requests might delay the scheduled completion of the project in 2014, Pradnyana said.

After full production facilities at Banyu Urip are finished, the field will produce 165,000 barrels of oil per day (bpd), according to estimates, up from a current 22,000 bpd using the early facilities in place.

MCL field public and government affairs manager Rexy H. Mawardijaya said that the company would comply with local regulations and cooperate with the Bojonegoro administration.

“There are six requirements from the regent that we have to fulfill. One of the most time-consuming processes is the swap of village land for other land. Acquiring new land is difficult, and permission also has to be processed by the Home Ministry,” he said over the telephone.

“We continuously report the progress of our work to the regent,” Rexy added.

MLC remained optimistic that the projects could be completed on schedule in 2014, Rexy said.

MCL would accelerate technical work in to compensate for possible delay, due to bureaucratic problems, he added.

EPC contracts to develop the Banyu Urip field were awarded for five projects: onshore production facilities, an onshore pipeline, an offshore pipeline, a floating storage and an off-loading (FSO) unit and other supporting facilities.

The EPC-1 contract, a US$746.3 million contract for production facilities, was awarded to PT Tripatra Engineering and Samsung Engineering on Aug. 5.

EPC-2, a $57.03 million contract for the construction, installation and design of insulated pipes, was awarded to PT Inti Karya Persada Tehnik (IKPT) and PT Kelsri.

EPC-3, a $131.64 million contract for an offshore pipeline and mooring tower, was awarded to PT Rekayasa Industri (Rekind) and LIKPIN LLC.

EPC-4, a $298.7 million contract for FSO, was awarded to PT Scorpa Pranedya and Sembawang Shipyard.

EPC-5 a $95.58 million contract to construct other supporting facilities, was awarded to PT Hutama Karya and PT Rekind.

Bringing the Banyu Urip field up to full production is the Indonesian government’s only hope of achieving its target of producing 1 million bpd of oil by 2014.

National production is currently 905,000 bpd.

According to BPMigas’ calculations, national oil production would reach 930,000 bpd in 2012, 940,000 bpd in 2013 and 1 million bpd once production at the Cepu block reaches full swing.

Executive director of the ReforMiner Institute Pri Agung Rakh-manto agreed that the Cepu block was a crucial part of Indonesia’s plans to ramp up oil production.

The target could be achieved if the block produced 165,000 bpd on schedule, he added.