Government Signs Two Oil and Gas Block Contracts at IPA Annual Event

The government has signed two production sharing contracts (PSC) for two oil and gas blocks and three gas sales agreements (GSA). These contracts were signed at the annual event organised by the members of the Indonesian Petroleum Association (IPA).

"Although this is fewer signings than last year, we remain optimistic," said Minister of Energy Sudirman Said at the opening ceremony of the 40th IPA Convention & Exhibition 2016 at JCC, Jakarta, Wednesday (25/5). (Read: Oil and Gas Tender in 2016, Government’s Revenue Sharing Must Be Above 51 Percent)

The PSCs were signed by Sudirman and the Head of the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) Amien Sunaryadi and the contractors. The two contracts pertain to the East Ambalat Block, which is a conventional oil and gas block, and the Central Bangkanai Block, which is a non-conventional gas block. The former is operated by Pertamina Hulu Energi and the latter by Adaco Energy.

Sudirman also witnessed the signing of three GSAs between gas producers and industrial users. The potential revenue from these GSAs is US$ 544.66 million or around IDR 7.4 trillion. (Read: Refuse to Discount Gas Prices, Government will Freeze Business Permits)

The GSA between ConocoPhillips (Grissik) Ltd and Pupuk Sriwidjaja Palembang (Pusri) is for the supply of 70 million cubic feet of gas per day (mmscfd) over five years. This GSA will generate additional revenue for the government of up to US$ 470 million or around IDR 6.392 trillion. 

The amended GSA between Medco E&P Indonesia and Meppo-Genfor a gas-fired power plant in Gunung Megang, Muara Enim, South Sumatra is for the supply of 10-16 billion British thermal units per day (bbtud) over two years. The potential additional state revenue from this revised contract is US$ 68.52 million or approximately IDR 931.87 billion. 

Finally, the GSA between Medco E&P Indonesia and regional-owned company Petrogas Ogan Ilir is to supply the needs of industry in Ogan Ilir, South Sumatra. The contract to supply gas supply of 1.3 to 1.6 bbtud is valid until December 31, 2019, and the potential revenue from the contract is US$ 6.14 million or around IDR 83.5 billion.

Additional gas supply for these two companies is sourced from the South Sumatra Block, which is located in the province of South Sumatra. This block is operated by Medco. (Read: SKK Migas: No Contractor Discovers Economical Reserves)

"The signing of these (contracts) is a concrete evidence of the support of the upstream oil and gas industry, which prioritises allocation of natural gas for domestic needs," said SKK Migas Head of Public Relations Taslim Z. Yunus.

Since 2003, the domestic gas supply has increased by an average of 9 percent per year. In 2013, the volume of gas for domestic needs exceeded gas exports. Last year, natural gas for domestic needs accounted for 3,882 mmscfd or 56 percent of total domestic gas production compared with gas exports of just 3,090 mmscfd (44 percent).