Only 3 Oil and Gas Exploration Blocks Able to Produce in Last 10 Years

The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) has highlighted the lack of contractors’ commitment to oil and gas exploration activities in Indonesia. This has significantly slowed the transition from exploration to exploitation in Indonesia’s oil and gas fields.

Head of the Commitment Actualisation Supervision Division at SKK Migas Nizar Mujahidin said that in the past 10 years, only three oil and gas blocks had moved from exploration to exploitation. “We feel the transition process from exploration to exploitation in oil and gas blocks is still quite slow,” he said in Jakarta on Thursday (19/5).

SKK Migas records show that as of May 2016, of the 295 oil and gas blocks in Indonesia, only 85 had entered the exploitation phase. Out of these 85 exploitation working areas, only 67 are producing. The remaining 18 working areas are still in the development phase. (Read: Oil and Gas Production Down This Last Month )

Meanwhile, only 113 of 210 exploration blocks are active, and 97 of exploration blocks have exceeded three years. Under Government Regulation No. 35/ 2004 concerning Upstream Oil and Gas Activities, contractors have six years to explore an oil and gas field with the opportunity to extend this term once for a maximum of four years. However, out of these 97 blocks, only 41 have fulfilled their commitment.

More specifically, in four of these 113 active blocks, no activities are being carried out. In 40 blocks, only the geological and geophysical studies have been carried out; in 28 blocks, seismic studies have been completed; and in 13 blocks drilling has started, but no reserves have been discovered. In another 26 blocks, drilling has started and reserves have been discovered. Only two working areas have entered their plan of development phase. (Read: Government Reviews 15-Year Deep Sea Exploration Term)

Nizar said there are a number of reasons that contractors had been unable to fulfil their commitments. Aside from low crude prices, contractors have encountered internal problems, such as financial issues.

This was evident from the growing number of contractors opening their data rooms in an effort to farm-out their shares in oil and gas blocks to secure additional funds from potential partners. “Aside from that, there are major (problems with) regulations and social issues,” explained Nizar.

Consequently, SKK Migas is pessimistic about meeting this year’s exploration well drilling target of 151 wells. Head of the SKK Migas Survey and Drilling Division, Ngatijan, estimated that only 50 wells would be drilled by the end of this year. (Read: SKK Migas Pessimistic in Achieving Drilling Target of 151 Wells )  

This estimation was based on the fact that only 16 wells were drilled between January and May this year. Eleven of these are in conventional working areas and five are in non-conventional working areas. Meanwhile, several contractors including Talisman, Santos, Kris Energy, Petronas, Saka Energy, Pertamina, and Dart Energy plan to start drilling in the near future.