The recent oil spill at the Offshore Northwest Java (ONWJ) Block, operated by state energy giant Pertamina, came at a time when the country’s largest oil and gas block operator is struggling to catch up with government production targets, creating tension between public institutions managing domestic oil and gas resources.

A well within Pertamina’s ONWJ oil and gas block, the reactivated YYA-1, began releasing gas that was then followed by an oil spill on July 12 after a well kick incident. At least 10 villages and marine life have been affected.

Pertamina has a lot of work to do and should treat the oil spill incident as a serious lesson, Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) chairman Dwi Soetjipto said Monday.

“We hope that the management of Pertamina can focus on improving its performance,” Dwi told the press on Monday. “Many things should be fixed.”

The ONWJ Block, operated by Pertamina’s upstream unit Pertamina Hulu Energi (PHE) with the capacity to produce 3,000 barrels of oil per day (bopd), has since had its operations closed. It will further drag down Pertamina’s low productivity issue that has been highlighted by the government.

Energy and Mineral Resources Minister Ignasius Jonan took to Instagram to criticize Pertamina’s capacity in managing oil and gas blocks, saying: “Many of the blocks operated by Pertamina lately have shown a significant decline in production.”

Dwi said the oil and gas regulator had also been “scolded” many times by Jonan for the poor realization of ready-to-sell production targets, called oil lifting.

“Five of the six underperforming oil and gas giant contractors as of June were Pertamina’s subsidiaries,” Dwi said. The six units — namely Pertamina EP, Pertamina Hulu Mahakam, PHE Offshore South East Sumatra (OSES), PHE ONWJ and Pertamina Hulu East Kalimantan — produced 69 to 95 percent of the target as of June.

Along with the failure of local energy firm Medco E&P’s operations in the Natuna Block, which booked 14,918 bopd or 77 percent of the target of 19,386 bopd, national oil production stood at 752,011 bopd or 3 percent below target. 

Meanwhile, national gas lifting as of June stood at 5,913 million metric standard cubic feet per day (mmscfd) or 84 percent of the target of 7,000 mmscfd. 

“We expect Pertamina to overcome its lifting performance to avoid a further decrease when a new block is handed over to Pertamina. The implementation of technology, as well as transfer of knowledge and investment, should be done as soon as possible,” Dwi said. 

In a sign of a postelection “pragmatism play” by the government, as global think thank Wood Mackenzie put it, the government has decided to extend the contract of US ConocoPhillips for the massive Corridor Block. That follows Pertamina’s take over of major expiring contracts including the Mahakam Block from France’s Total Indonesie E&P and the Rokan Block from US giant Chevron.

Responding to oil and gas regulators’ criticisms, Pertamina VP for corporate communications Fajriyah Usman said the firm will put maximum efforts in the second half so that the target can be achieved, with the hope it could be exceeded.

“Operational activities will be increased mainly in drilling, well intervention and maintenance of production facilities. These efforts are expected to improve our production performance,” she told The Jakarta Post on Tuesday.

In a bid to reach the full-year production target of 922,000 barrels of oil equivalent per day (boepd), Pertamina has increased its upstream budget 10 percent from US$2.6 billion to $2.9 billion. 

Pertamina upstream director Dharmawan Samsu said the firm would continue the good drillings, well interventions and improving production facilities. 

“Through these efforts, we believe that it could increase production until year-end. We can say that in the first six months we have learned how to copy the performing assets,” he said.

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