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Chevron wants smooth transition on Rokan
US oil giant Chevron Corporation believes that the transition of its Rokan oil block in Riau to state energy holding company Pertamina will go smoothly as the transition period given to the company to prepare for the change of the operation of the block is sufficiently long
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span>US oil giant Chevron Corporation believes that the transition of its Rokan oil block in Riau to state energy holding company Pertamina will go smoothly as the transition period given to the company to prepare for the change of the operation of the block is sufficiently long.
Wahyu Budiarto, the newly appointed senior vice president policy government and public affairs for Chevron’s local arm Chevron Pacific Indonesia, said on Wednesday that the 2.5 years would be long enough to ensure a smooth transition.
“In Rokan we have 2.5 years. We hope that with this long time the transition will run smoothly. We have created a team with Pertamina and SKK Migas [Upstream Oil and Gas Regulatory Task Force],” he said, adding that in the transfer of the Siak block to Pertamina in 2013, Chevron was given only a six-month transition period.
Wahyu further said the team, which would supervise another “working team”, had been meeting intensively to discuss the process of transition, such as replacing the block’s old oil pipeline.
“It is important not to be late in replacing the pipeline because the replacement needs to be carried out after 2021, it can only be finished in 2026 or 2027. As a giant contractor, we don’t want to leave the block with a problem as our image is at stake too,” he said.
The pipeline has been operating for around 60 years. Chevron initially planned to replace it in 2011 but later canceled this. “We have told the government that we won’t replace the pipes because the time for the replacement was too close to the end of our contract, which was based on a cost recovery scheme, but we told them that it should be the top priority of the new operator,” he said.
Chevron has estimated that the process to complete the replacement of the 88.9-centimeter oil pipeline will take about three to five years as the pipeline should continue in operation during the replacement process.
The pipeline concerned is the main oil pipeline that travels from the Rokan block’s gathering station to Dumai, which is the location of Chevron’s crude transportation terminal.
Previously, Pertamina upstream director Dharmawan Samsu said the firm would replace the block’s oil pipeline before the end of the current contract in 2021.
“Building a pipeline needs around two years and there will be a risk if the pipeline isn’t working and [there is also the need] to prevent a problem in the production flow because of maintenance,” he said, adding that the replacement could start this year.
Wahyu of Chevron concurred that Pertamina had to speed up the replacement of the oil pipeline as the firm would have to face the challenge of dealing with residential areas near the pipeline. Most of which were not there during the installation.
“Currently the pipeline runs on the main streets of Riau. When we first built it, the location was still a forest or inspection roads where fewer people lived,” he said.
The social impact on the local population will have to be considered as the replacement process will disrupt daily activities, especially when the project needs to procure new land.
He said that the project might require more than 5 hectares and Pertamina would have to set up a new team to find the right location, which will take time.
Furthermore, Pertamina president director Nicke Widyawati said the firm still had legal problems with the transition process.
“The transition in the Rokan block has yet to begin as legally speaking we can’t enter it yet,” she said adding the firm was still mulling the option of picking a partner to operate the block.
Her statement contrasted with the statement from the Energy and Mineral Resources Ministry in May, which said the transition in the Rokan Block could begin after the government signed the new contract for the block with Pertamina on May 9.
Regarding the possibility of partnering with Pertamina in the Rokan block, Wahyu of Chevron said that his firm had yet to discuss it, it was currently only focused on the transition process.
The government appointed Pertamina last year to take over the Rokan block’s operation when Chevron Indonesia’s contract terminates in 2021. Once the country’s largest oil and condensate producer, Rokan’s daily oil and condensate production totaled only 196,515 barrels oil per day (bopd) as of April 30, overtaken by ExxonMobil’s Cepu Block in East Java, which produced 219,787 bopd in the same period.
The outlook for the Rokan block is not good in the eyes of global energy think tank Wood Mackenzie, which has come up with a lower forecast for Rokan’s oil production this year of only 180,000 bopd.
