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Jakarta Post

Govt OK's up to $1b cut in Rokan Block production cost

  • Stefanno Reinard Sulaiman

    The Jakarta Post

Jakarta   /   Mon, August 13, 2018   /   04:11 pm
Govt OK's up to $1b cut in Rokan Block production cost Energy and Mineral Resources Deputy Minister Arcandra Tahar (JP/Dhoni Setiawan)

The government has approved a plan in production cost cut up to US$1 billion for the Rokan Block, one of the country’s most productive oil and gas blocks.

Energy and Mineral Resources Deputy Minister Arcandra Tahar told the press recently that the cost cut was possible because remediation for contaminated soil would be implemented in Riau, where the Rokan Block is located.

“Earlier, they had to rehabilitate oil-contaminated soil in Cibinong [Bogor Regency]. This burdened the company more in terms of transportation costs,” Arcandra said, and that the plan had already been implemented.

The cut is expected to help the government’s effort in reducing the operational cost of the block. The Rokan Block is currently operating under a cost recovery scheme that will shift to a gross-split scheme in 2021, when the block is to be taken over by state-owned energy holding company Pertamina from PT Chevron Pacific Indonesia (CPI), the local subsidiary of US oil and gas giant Chevron Corporation.

The gross-split scheme has been applied to all new production-sharing contracts (PSCs) since early 2017. The government has inked 25 gross-split PSCs for onstream oil and gas blocks since June 2018.

In addition to the transportation cost, Arcandra said that the volume of contaminated soil would be reduced following the Environment and Forestry Ministry's approval to lower the oil contamination standard. (bbn)