Coordinating minister for investment and maritime affairs, Luhut Binsar Panjaitan said, PT Chevron Pacific Indonesia (CPI), unit of United States-based oil producer, Chevron Corp., (CVX.N) agreed to operates Rokan block until the contract end on August 2021 - Photo by the Company

JAKARTA (TheInsiderStories) – Coordinating minister for investment and maritime affairs, Luhut Binsar Panjaitan said, PT Chevron Pacific Indonesia (CPI), unit of United States-based oil producer, Chevron Corp., (CVX.N) agreed to operates Rokan block until the contract end on August 2021.

“We closed Rokan Block yesterday. We agreed that Chevron will continue the project until August 2021,” said the senior minister through a video conference today (03/18).

As reported, the oil and gas producer rejected the government order to keep the production of Rokan block before the contract ended. But CPI rejected the order, caused according to the president director, Albert Simanjuntak, the step was considered uneconomical.

After the contract ends, the giant block in Riau province, will be taken over by state-owned energy producer, PT Pertamina. The CEO, Nicke Widyawati has urged Chevron to involve her companies in the transition period to maintained the wheels’ production capacity.

The minister for energy and mineral resources (MEMR), Arifin Tasrif, also expressed his hope that the US producer would maintain the production of Rokan block. Arifin said if there were things that had not been agreed upon, his side requested that the Cooperation Contract Contractor (KKKS) could respond to the decline in production.

The Rokan Block is one of Indonesia’ mainstay oil fields. Previously, this block had succeeded because of its highest oil production among other oil and gas blocks. The block covers an area of ​​220 kilometers with more than 96 oil wells. Three of them have great oil potential, namely Duri, Minas and Bekasap wells.

From Pertamina’ data, Rokan‘ oil production has indeed declined, from 338,000 barrels per day (bpd) in 2012 to 190,000 bpd in 2019. The number of drilling activities in the Rokan block fell from 625 drilling in 2014, to 280 drilling in 2015, then 119 drilling in 2016, and finally 0 drilling in 2019.

The oil and gas holding company, predicts that in August 2021, when Rokan is transferred to Pertamina, the average production figure will be around 140,000 bpd.

Pandjaitan earlier said the American company committed to investing US$88 billion that will disburse in the two phases. In the first phase from the contract ends in 2021 to 2031, the company will disburse $33 billion with a production target of 500 million barrel.

In addition, the company will disburse the remaining $55 billion in the next 10 years after 2031 with a production target of 700 million barrel. Chevron also committed to use the full-scale EOR technology in Rokan block that will boost oil reserve up to 1.2 billion barrel.

End of last year, Chevron has announced a 2020 organic capital and exploratory spending program of US$20 billion. The budget needs to support an upstream and downstream investments, highlighted by the company’ Permian Basin in Kazakhstan and an advantaged queue of deepwater opportunities in the Gulf of Mexico.

“We are positioning Chevron to win in any environment by ratably investing in the highest return, lowest risk projects in our portfolio. Our emphasis on short cycle investments is expected to deliver improved returns on capital and stronger free cash flow over the long-term,” said Chevron Chairman and CEO Michael Wirth in an official statement.

He continued, the company will reduce funding to various gas-related opportunities including Appalachia shale, Kitimat LNG, and other international projects. Chevron is evaluating its strategic alternatives for these assets, including divestment, he adds.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com