Chevron’s future in Siak block remains uncertain

JAKARTA. The government has not yet decided whether to grant an extension to PT Chevron Pacific Indonesia to allow it to maintain its operations at the oil-rich Siak block in Riau, Sumatra, despite the firm’s existing contract expiring on Nov. 27.

The Energy and Mineral Resources Ministry’s director general for oil and gas, Edy Hermantoro, said the ministry was still working on technical details regarding the future of the contract.

 “The main point is to prevent the [Siak block’s] production from being disrupted. We are looking at several alternatives; we need to secure the maintenance of the block,” Edy said on Monday.

Meanwhile, Deputy Energy and Mineral Resources Minister Susilo Siswoutomo said his office was discussing a draft ministerial regulation that would provide the legal basis for several due-to-expire oil and gas contracts.

“The ministerial regulation, which would extend PSCs [production sharing contracts] that are due to expire including Kampar, Siak, Mahakam, is being finalized,” Susilo said on Monday.

 “There are some basic principles included. All expired contracts will be returned to the state and, therefore, the country will derive more [benefits]. This is what is being discussed in the ministerial regulation. The second principle is that operations at blocks with expiring contracts must not be stopped,” he added.

The Siak block currently produces 2,000 barrels per day (bpd) of crude oil, which is equivalent to 0.6 percent of Chevron’s total average production of 330,000 bpd.

At this amount, Chevron’s production equals 40 percent of Indonesia’s total oil output.

With the US-based company’s contract due to expire, state-owned PT Pertamina and PT Riau Petroleum, a local Riau firm, have expressed an interest in taking over production at the Siak block.

Some say there is rising nationalist sentiment in the country’s oil and gas industry, which is demanding greater control over strategic local assets.

The Siak block is one of 29 concessions that are set to expire between 2013 and 2021.

Susilo said that if the government failed to decide the fate of the Siak block by the due date, it would ask Chevron Pacific Indonesia to continue running the block temporarily until a final decision was made.

 “We would like to see a national company gain but, of course, that depends on the complexity and size of the operations,” he said.

Separately on Monday, Australian oil and gas company Santos Ltd. said it had gained approval from the Indonesian government to acquire a 50 percent stake in and take over operations at the Northwest Natuna PSC from another Australian firm, AWE Ltd.

AWE agreed last August to sell half its ownership in the PSC to Santos in a deal worth US$188 million.  Under the agreement, AWE will transfer the operation of the block to Santos.

The agreement also stipulates that AWE and Santos’ joint ownership of Natuna will be reduced equally if they find an Indonesian company qualified to acquire a 10 percent interest in the PSC.

The Northwest Natuna PSC includes the Ande-Ande Lumut oil project, which is estimated to have gross 2P (proved and probable) reserves of 101 million barrels.

“We haven’t started [looking for an Indonesian partner]. We have only sorted out the operator,” Didik Setyadi, Santos’ external relations manager, said. (Raras Cahyafitri/The Jakarta Post)