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Jakarta Post

Chevron postpones $12b deep water drilling project

  • Nadya Natahadibrata

    The Jakarta Post

Jakarta   /   Tue, October 14, 2014   /  09:38 am

A unit of the US oil and gas giant Chevron Corp., PT Chevron Pacific Indonesia, is delaying its US$12 billion Indonesia Deepwater Development (IDD) project in the Makassar Strait in East Kalimantan, an official has said.

The program director for the Energy and Mineral Resources Ministry'€™s oil and gas directorate general, Naryanto Wagimin, said the company had submitted a letter to acting Energy and Mineral Resources Minister Chairul Tanjung requesting the postponement.

'€œThe company is planning to revise its calculations on the project, following the discovery of a new gas reserve, which has increased the project'€™s monetizing value,'€ Naryanto told The Jakarta Post on Monday.

Naryanto said Chevron required time to revise their plan of development (POD) before moving ahead with the project. He estimated the project would begin one year later than previously planned.

'€œGod willing, they will be able to submit the concept by the end of this year,'€ he said. '€œOtherwise, it will disrupt the domestic supply of gas in coming years.'€

Chevron obtained approval in 2008 for a POD for the $12 billion-project, the nation'€™s first deep water gas project.

The project involves four production sharing contracts (PSCs) for Ganal, Rapak, the Makassar Strait and Muara Bakau, with five gas fields: Bangka, Gehem, Gendalo, Maha and Gandang.

The Bangka field was initially scheduled to begin production in 2016, followed by the Gehem and Gendalo fields in 2018.

Total production from the four PSCs is expected to reach more than 1,000 million standard cubic feet per day (mmscfd) of gas, with total gas reserves of 2.3 trillion cubic feet.

The government is currently trying to persuade oil and gas companies to explore the eastern part of the country.

Wagimin previously said that if there was no significant improvement to supplies within the next few years, Indonesia, once the world'€™s largest liquefied natural gas (LNG) producer, would become a net importer as of 2020.

The country is estimated to have 104 trillion standard cubic feet (tscf) in proven and 48 tscf in potential gas reserves, making it the 13th-largest owner of proven natural gas reserves in the world and the second-largest in Asia Pacific after China, according to the International Energy Agency.

Gas production in 2013 reached 6,869 mmscfd, 52 percent of which was sold overseas, according to figures from the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas).

Chevron had previously pushed the government to assist the project, which had been held up by permit issues, threatening to allocate its $12 billion budget for a deep water drilling project in another country with fewer obstacles.

  • Chevron discovers new gas reserves, seeks time to revise calculations: Ministry
  • If the project sinks, it will disrupt domestic gas supplies in the future

Chevron asked the government to extend the period of the Makassar Strait PSC from 2020 to 2028, to match the three other PSCs, which expire in 2028.

SKKMigas acting head Johanes Widjonarko said separately that Chevron, along with the task force, was conducting a technical study regarding Chevron'€™s proposal to revise its POD.

'€œChevron is planning to revise the POD, referring to an increase in technical costs [due to the additional gas reserves],'€ Johanes said, adding that he had no idea whether the investment would go beyond $12 billion after the revision.

Representatives from Chevron, however, could not be reached for comment on the matter.

Chevron Pacific Indonesia'€™s vice president for strategic business support, Yanto Sianipar, told over the weekend that the letter submitted to the ministry was not related to the request to postpone the project.

He said the letter merely provided an update on recent developments regarding the IDD project.

'€œThere are a lot of things that Chevron can'€™t explain as yet,'€ Yanto said.

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