issues for writing competition

8/17/2019 Issues for Writing Competition

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HMTM “PATRA” ITB 3

challenges remain: Indonesia’s investment climate for conventional oil & gas is broadly uncompelling

both regionally and globally. Some of these issues can cross over into unconventional, particularly

ones of above ground operating and regulatory environment. Others are potentially amplified in an

unconventional setting. Much of this can be addressed via clear, supportive and enabling regulation.

Additionally, fiscal terms are critical in competing for the internationally mobile skills and capital that

shale intensively utilises. Ultimately, Indonesia is highly fiscally motivated to stimulate shale activity.

Figure 1. Seven major Indonesian shale basins

Source: www.riscoenergy.com


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Joint operation of Natuna block proposed

Raras Cahyafitri

thejakartapost.com

Thu, January 7 2016 | 05:43 pm

Following years of delays in the development of a number of gas projects around the

Natuna Islands, an exploration committee is planning to propose a joint developmentinvolving a number of blocks in the area as part of moves to make costly projects more

feasible.

Andang Bachtiar, the head of an ad-hoc national exploration committee established in 2015,

said the team was currently working on the plan for five blocks in the environs of the

archipelago.'We will propose a joint POD [plan of development] for five blocks. Under the

plan, each party will be responsible for the development of certain facilities, but

management will be shared,' Andang said. According to Andang, the five blocks include East

Natuna block 'previously known as Natuna D-Alpha ', Tuna block and South Natuna Sea

Block B.

East Natuna block has total proven reserves of 46 trillion cubic feet ( tcf ), making it the

largest gas reserve in Asia. Unfortunately, the gas field has a high CO2 level of around 71

percent, necessitating advanced technology and huge investme nt to develop the block. As

reported earlier, the block needs between US$20 billion and $40 billion in investment.

State-owned Pertamina, US-based ExxonMobil, France's Total SA and Thailand's PTT

Exploration and Production ( PTT EP ) are among oil and gas firms reportedly interested in

the block.Development of East Natuna is estimated to be feasible only if oil prices exceed

$100 per barrel. Currently, the global glut has pushed the price to a level of $37 per barrel.

Meanwhile, Tuna block is operated by Premier Oil, which holds a 65 percent stake. The

remaining 35 percent is held by the Mitsui Exploration Company. On the other hand, South

Natuna Sea Block B contractors are Conoco Phillips with 40 percent ownership, leaving

Chevron and Inpex with 25 percent and 35 percent, respectively. According to a recent

report, the contractors are seeking to release part of their stake to new partners.

According to Andang, all the planned blocks are located in remote areas, and there has been

no discussion among operators. 'If we work together, I'm sure we can shift the politicalconstellation as well as the constellation of oil and gas prices, because the reserves there


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are huge,' he said, adding that the plan had to be formulated as soon as possible, as

implementation would take two or three years.

Meanwhile, Pertamina director for upstream affairs Syamsu Alam said earlier that the

contractors had asked for a two-year extension to the period of principal of agreement

(POA) of East Natuna block, which expired on Dec. 10.

The POA for East Natuna field, formerly known as the Natuna D-Alpha block, was seen as an

important stage prior to the signing of a production-sharing contract ( PSC ). The POA was

signed in 2011, the same year the PSC for East Natuna was expected to be concluded.

However, no progress has been reported to date. 'Even if the extension is granted, it's

unlikely the block will be producing by 2030,' Syamsu said.

The Natuna Islands in the South China Sea are Indonesia's northernmost territory. While

they lie far from the so-called nine-dash-line claimed to mark China's territory, recenttensions have driven the government to exert its stake over the area.


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Energy holding company to speed up

gas infrastructure development:

Indonesian official

Kamis, 21 April 2016 18:10 WIB | 1.625 Views

Jakarta (ANTARA News) - A holding company in the energy sector would help speed up

massive development of gas infrastructure, an official said. "We very much support plan to

put PT Perusahaan Gas Negara (PGN) in a holding company under Pertamina as the parentcompany," Oil and Gas Director General IGN Wiratmaja Puja said here on Thursday.

Wiratmaja said with the combination, it would be easier for the energy and mineral

resources ministry in assigning massive infrastructure program in the energy sector.

Meanwhile lawmaker Satya W Yudha from the Commission VIII of the Parliament said the

merger would improve efficiency in the development of gas infrastructure. Executive

director of Energy Watch Indonesia Ferdinand Hutahean said after the combination the first

step to be taken is to determine a strategy and priority scale for gas infrastructure

development. Development of household gas infrastructure should be a priority that thepeople could have cheaper energy replacing more expensive LPG, Ferdinand said. Networks

of gas infrastructure for industry should also be expanded that the countrys manufactured

products would be more competitive in prices with the use of cheaper energy, he said.

Earlier, Minister for State Enterprises (BUMN) Rini Soemarno said PT Perusahaan Gas

Negara (PGN) would become a subsidiary of Pertamina. Pertamina would be the parent

company. The shares owned by the government in PGN would be handed over to

Pertamina, whicyh is wholly owned by the government, Rini said. She said the process of

forming the energy holding company has been in the final phase and it is expected to be

wrapped up in September this year. Implementation is waiting only for a draft government

regulation which is expected to be issued in mid July, she added. She said the plan is part of

the program of grouping state companies in a number of holding companies. She said

holding companies would also be formed in five other sectors - finance, construction and

engineering, toll road, mining and housing. She said PT Pertagas, which is a subsidiary of

Pertamina operating in gas production, could be combined with PGN that they would not

operate separately.

The office of the state enterprises minister said the energy holding company would be

formed before July this year. This year, Pertamina was asked by the government to build city


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gas networks in six areas for 23,158 households to add to 26,225 households already having

gas supply in March 2016. Gas pipe networks are already installed and operational in six

cities including Prabumulih, South Sumatra for 4,650 households, Jambi 4,000 households,

and Sengkang, regency of Wajo, South Sulawesi 4,172 households, Bulungan,EastKalimantan

3,300 households; Sidoarjo, East Java 6,154 households and Bekasi, West Java 3,949households. PT PGN also plans to expand its gas pipe networks by a total of 600 kilometers

in 10 cities this year including Jakarta, Bekasi, Cirebon, Pasuruan, Surabaya, Sidoarjo,

Semarang, Medan, Batam, etc. PGN already distributed gas to more than 107,690

households until early 2016.

(Uu.H-ASG/O001)


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The need for a national strategic petroleum

reserve

Montty Girianna - director for energy, mineral resources and mining at the

National Development Planning Board ( BAPPENAS )

Jakarta | Wed, February 13 2013 | 08:48 am

The fact that our fuel demand is increasingly met through higher imports is really alarming.

Today, not only do imports comprise two-thirds of gasoline and one-third of diesel fuel for

domestic consumption, but also one-third of crude oil for intake to our refineries. Exposure

to international oil markets is thus astonishingly huge.

Our crude production is falling; it has steadily decreased to much less than 1 million barrels

a day. Mature oil fields with declining rates of production and a shortage of investment in

new exploration contributes to low rates of production. Our refining capacity also remains

stagnant. We have not expanded our refining capacity over the past20 years.

The combination of an unfavorable rate of crude production and a shortage of refining

capacity, in the face of avid domestic consumption, has led to increasing dependency on

imports — increased vulnerability in our energy security. In fact in 2005, this country was

the only OPEC member that was a net oil importer.

Too heavy a dependency on imports is risky in many ways. As we set fuel prices fixed below

the international market rate, soaring and volatile import prices have led to a large and

unpredictable subsidy allocation, creating an excessive fiscal burden. Sadly, this forces us to

forego vital investments such as in health, education and infrastructure, and makes the

subsidy allocation difficult to predict leading to numerous government-budget revisions.

This mismatch is even worse when we project our demand for the next 10 to 20 years. We

are committed to having economic growth of 7 percent a year and with that commitment, a

huge volume of gasoline and diesel needs to be secured to fuel the engine of development.

In the coming 10 yea rs, the demand for gasoline will double and that for diesel will increase

by one-third.


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Of course we have to work on the demand side by promoting efficiency measures, as well

as on the supply side by increasing production. But more fundamentally, when we are

relying on imports, is to develop a mechanism or an instrument by which price shocks can

be effectively absorbed, and our budget securely set, hedged against uncertainty.

We should consider what the International Energy Agency (IEA) has initiated. The IEA,

established in the wake of the 1973 oil crisis, requires its members to have a Strategic

Petroleum Reserve ( SPR ) as a way to hedge against oil price shocks. The members have to

maintain an oil stock sufficient to fulfill demand for three months, either held exclusively for

emergency purposes or for commercial and operational use.

The US, an IEA member, has an SPR of 174 days, of which 98 days is held by industry and the

balance by the government. The UK is another IEA member having an SPR of 268 days

entirely held by industry. Non-IEA countries such as China and India have launched their

own reserve programes to hold the same stock levels mandated by the IEA.

We cannot wait to have an SPR until we are in a very bad shape. At least, for now, the

government has to provide legislation as well as policies on the long-term perspective for an

SPR, and start collaborating with industry to formulate a scenario of fuel stockholding

obligations.

Policies have to be developed to ensure that the SPR is a part of price-smoothing

instruments to “protect” consumers from volatile import prices. Given the present

circumstances, the Mid-Oil Platts Singapore ( MOPS ) price would best serve as a basis for

developing a scenario for an SPR.

We cannot fully pass the volatility of MOPS on to domestic prices, and the SPR has to be

designed to fulfill that intention. In addition, an SPR has to be seen as a hedging mechanism

against oil price jumps that are deemed to have a major impact on our national economy. A

definition of “major impact” must be set to justify the need and the size for the SPR, and

later on as a basis for triggering a release of SPR stocks.

Also, the SPR has to be developed as a building block to mitigate a severe fuel supplydisruption. An unplanned refinery shutdown would be a major reason to justify holding

back-up fuel stocks.

Power outages can be avoided by providing buffer stocks of fuel for a power plant. An SPR

should hold fuel stocks that are consumed in a large quantity by consumers. Today, we

should focus on stocks for gasoline and diesel, but later on a stock of liquid petroleum gas (

LPG ) and crude would also be necessary.

Finally, the SPR has to be developed both for emergency purposes through public stocks, as

well as for commercial and operational use via stockholding obligations on industry or


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private stocks. We might expect stock levels held by the public to be generally larger than

the government’s stockholding obligation. Currently, Pertamina holds fuel stock for 20 days

for commercial and operational use. Public stocks should be much larger than that.

The revision of Oil and Gas Law No. 22/2001 should define the fundamental traits of anySPR. The law should clarify who will ultimately be accountable for implementing the SPR,

who will own the stock, and the roles of our state-owned oil company Pertamina and

industry players, etc.

In the mean time, we can identify and assess what is the current available infastructure,

including refineries, oil terminals, pipelines, floating storage units, etc., and their capacity.

How can they be pledged for SPR?

The expansion of existing refineries and development of new refineries and crude terminals

has to be within the framerwork of SPR implementation. Exploring potential access to

neighboring storage and oil trading hubs in Singapore might also be necessary for short-

term purposes. It is important to have a consensus among policymakers on a realistic

timeframe for SPR development, short- and medium-term, as well as long-term.

Overall, the aim of having an SPR is to ensure the security and sustainability of adequate

fuel supplies, i.e., gasoline and diesel, for the domestic fuel market. A key task of course is

to guarantee the availability and smooth distribution of fuel to everyone anytime,

anywhere.

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