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Government defends Rokan deal, again
The government has once again defended its latest decision to allow state-owned energy holding company Pertamina to manage Rokan, one of the country’s most productive oil blocks, saying that those who criticized the decision may not have enough knowledge about the deal
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he government has once again defended its latest decision to allow state-owned energy holding company Pertamina to manage Rokan, one of the country’s most productive oil blocks, saying that those who criticized the decision may not have enough knowledge about the deal.
Energy and Mineral Resources Deputy Minister Arcandra Tahar said the method used by critics to determine how Pertamina would perform in Rokan, the cost per barrel formula, could be misleading to the public.
The cost per barrel formula refers to a calculation of how much an operator will have to disburse to get one barrel of oil and gas in the block it is working on. Logically, it will be cheaper when a firm operates bigger blocks.
Data from the Energy and Mineral Resources Ministry shows that between 2013 and 2017, the cost per barrel in Rokan stood at US$19.80.
“So it is definitely much more fair to compare how much drilling activity Pertamina will conduct in the block with a calculation of US dollars per meter,” Arcandra said over the weekend.
On July 31, Pertamina was awarded the contract to work on the Rokan block with a $784 million signature bonus, a $500 million five-year working commitment (exploration activities) and $57 billion in potential state revenue over a 20-year period.
The contract to manage the Rokan block, which is currently under the control of United States-based oil firm Chevron through its subsidiary PT Chevron Pacific Indonesia, is set to expire in 2021 and the government has allowed Pertamina to operate the block for the next 20 years until 2041.
Pertamina has pledged to double the oil production from around 200,000 barrels of oil per day (bopd) through a drilling plan on at least 7,000 new exploration points in the block and around $70 billion of investment for exploration over the 20-year period.
Three of those categories are also said to be the key considerations for the government to end Chevron’s operatorship in the block after 50 years.
Still unclear, however, are the details of Chevron’s proposal, which the government said was “much lower” than that of Pertamina.
“It would be unethical to disclose the details of Chevron’s proposal. [….] Yet I can assure you that the decision is based on rational, not emotional grounds,” Arcandra said.
Arcandra further said there was a possibility of increasing the cost per barrel after Pertamina unveiled plans to implement a technology to recover billions of barrels already discovered, but not yet fully exploited. The technology is known as enhanced oil recovery (EOR).
“Pertamina has said it could obtain 1.5 billion barrels of oil equivalent per day [boepd] for a period of 20 years,” he said.
Pertamina Upstream Director Syamsu Alam previously said the firm could start using the full-scale EOR technology for the Rokan block in 2024 only after the pilot-phase had been completed.
“In principle, we still see some potential to optimize several working programs to reduce the declining rate [in the block]. The public should be reminded that the block is in its mature age, which means it is not easy to return Rokan’s best performance in a short period of time,” Syamsu told The Jakarta Post recently,
Besides the cost per barrel category, Arcandra also maintained that by appointing Pertamina, the government prioritized the importance of the signature bonus, which is based on the net present value and firm working commitment.
“The firm working commitment is to ensure that exploration activities will take place over a five-year period, and if the operator fails to implement their plans, we will get the money,” Arcandra said, adding that Pertamina’s signature bonus in Rokan was a record deal.
