The PSC in East Natuna Block must wait till 2018

KATADATA - Pertamina still could not apply the Production Sharing Contract (PSC) in East Natuna Block in Indonesia until June 2018 because the government extended the Principle of Agreement (PoA) in the block from the expiry date on December 10^th 2015 until mid-2018. The extension of the PoA is because of the plunging global oil price, as said by Djoko Siswanto, the director for upstream oil and gas business development in the Energy and Mineral Resources (EMR) Ministry, to Katadata on Monday, December 21.

(More about the plunging global oil price: Oil Price will fall again as it touches the Lowest Point since 2009)

Ever since the block is delegated to Pertamina by the ministry on June 2^nd 2008 until now, the Production Sharing Contract is still unable to be applied. The reason is because Pertamina considers the economic condition of the block is still very low. And so, Pertamina, with its partners, still needs to discuss several terms and condition to determine the PSC. Pertamina will manage the block with ExxonMobil, PTT Thailand, and Total E&P Indonesie, with Pertamina and ExxonMobil to hold 35 percent each of the block’s stakes, while PTT and Total to hold 15 percent each.

However, the fact is that East Block Natuna has a gas proven reserve that reaches 46 trillion cubic feet (TCF), which is much larger than Masela Block’s, which only has 10.7 TCF. But the problem of this block that makes the economic condition is not efficient for Pertamina is the CO2, or carbon dioxide, in the block reaches 70 percent, which is very large and could damage the pipes. And so, Pertamina asked the government for special privileges in the block in the form of several incentives. The government agreed and has prepared several of them. One of them is to prepare a larger-than-average PSC portion compared to other oil and gas blocks. 

The split will be at 55:45, which means 45 percent is for Pertamina, and the remaining is for the government. This is unique and a special split portion for Pertamina in the block, because the usual split for ordinary oil and gas blocks is at 85:15 for gas fields and 70:30 for oil fields.

Other than the large reserve, despite of the problem, this block is in a very strategiv position for Indonesia, which is located in the Natuna Sea and is near the South Chine Sea. And so, Pertamina’s existence in those waters is very crucial to keep the sovereignty of Indonesia, since China tends to claim that Natuna is still included in China’s territory, as said by oil and gas industry practitioner, Gamil Abdullah.