The government has finally approved the development plan for the Nunukan Block in East Kalimantan. Located near the border with Malaysia, this oil and gas project is vital to maintaining Indonesian sovereignty.
The Energy Ministry’s Business Development Director for Upstream Oil and Gas Business activity Djoko Siswanto said that minister Sudirman Said had accepted the first plan of development (PoD) for the Nunukan Block, submitted by the state-owned oil and gas giant Pertamina. This will be the first time that Pertamina has developed an offshore production facility.
“The first Nunukan PoD will only strengthen Indonesia’s sovereignty in the border area. It prevents Malaysia from grabbing any more Indonesian territory,” Djoko told Katadata, Wednesday (4/6). This makes Pertamina’s role in managing the oil and gas block particularly important. (Read: Nunukan Block: A first for Pertamina)
The ministry’s Director General for Oil and Gas Affairs I.G.N. Wiratmaja Puja said the East Kalimantan local government will gain a 10 percent of its participating interest. Article 34 of Government Regulation 35/2004 on upstream oil and gas business activity states that a contractor of an oil and gas block must offer a 10 percent participating interest to the local government, through a local government owned enterprise.
However, the President Director of Pertamina Hulu Energi (PHE) Gunung Sardjono Hadi explained that he had not received any official notification from the government’s Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas). “I will double check. When the PoD is approved, we will start the front end engineering design (FEED) and get the final investment decision from the company,” Gunung said to Katadata, Wednesday (4/6).
PHE will then need to complete the project engineering and commercial aspects of the plan. If all goes well, the final investment decision will be made this year. After that, the firm will begin discussing the engineering, procurement, construction, and installation (EPCI) for the block, which will take an estimated two years.
If all goes to plan, the Nunukan Block should be up and running by 2019. This block has the reserves to produce 2,000 – 2,800 barrels per day (bpd) of oil or condensate and 60 million cubic feet per day (mmscfd) of gas. The oil and gas will be sold to PHE’s holding company, Pertamina.
The oil from Nunukan Block will later be shipped together with oil from Pertamina EP Bunyu and Pertamina EP Sembakung to be processed at the Balikpapan Refinery. However, the government is still trying to decide whether the gas will be turned into liquefied natural gas (LNG) or be channelled through gas pipes. (Read: North Kalimantan Gets 10 Percent Stake in Nunukan Block)
The Nunukan Block is operated by PHE Nunukan Company, which initially held a 35 percent participating stake in the block. The company’s share increased to 64.5 percent last year when Medco Energy International farmed-out its stake and offered it to Pertamina. Medco decided that further development of the block was not financially viable.
Other oil and gas firms with stakes in the block are Videocon (23 percent) and BPRL Ventures Ind, which owns the remaining 12.5 percent.
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