Govt extends four contracts

The government has extended four oil and gas contracts that are expected to bring in an estimated US$4.58 billion in investment over the next 20 years.

The four contracts cover Block A in Aceh, and the South Sumatra blocks (operated by PT Medco E&P), the Bawean block (operated by Canadian company Camar Resource Canada Inc.) and the Madura Strait block (operated by Canada’s Husky Oil Madura Ltd). The South Sumatra and Bawean blocks have started producing oil and gas, while Block A and the Madura Strait blocks are still being developed.

After a contract signing ceremony on Wednesday, Oil and Gas Director General Evita Herawati Legowo said the four new contracts were the first oil and gas contracts that were written in both English and Indonesian. Previously, all contracts were written in English only. Other contracts in future would be made in both languages, Evita said.

Evita said the contract extension was expected to increase Indonesia’s oil stockpile by 321 million barrels and gas stockpile by 2.4 trillion cubic feet. During the 20 year extension period, the four blocks are expected to produce 174 million barrels of oil and 1.78 trillion cubic feet of gas.

The government will prioritize using gas from the four blocks to supply domestic industries. Up to 128 million standard cubic feet of gas per day (MMSCFD) produced by the South Sumatra block will be allocated to fertilizer producer PT Pupuk Sriwijaya and a power plants in South Sumatra. Around 110 billion British thermal units of gas per day (BBTUD) will be supplied to fertilizer producer PT Pupuk Iskandar Muda and state power firm PT PLN in East Aceh.

As for the Madura Strait block, up to 100 MMSCFD will be supplied to PLN and other industries in East Java.

The Oil and gas sector is the backbone of Indonesia’s state budget, comprising around 30 percent of state revenue. The government had targeted to produce and average of 965,000 barrels of oil per day this year, but upstream oil and gas regulator BPMigas said the target would be difficult to meet because of a drop in production at the Duri block in early October.