Chevron Corp., (NYSE: CVX) said pulled out from the Indonesia Deepwater Development (IDD) block in East Kalimantan and is offering the continuation of the block to an Italian oil and gas company, ENI s.p.a, said the government official - Photo by the Company

JAKARTA (TheInsiderStories) – American multinational firm, Chevron Corp., (NYSE: CVX) said pulled out from the Indonesia Deepwater Development (IDD) block in East Kalimantan and is offering the continuation of the block to an Italian oil and gas company, ENI s.p.a, said the government official. Since early of this year, the company has informed to sell their participating interests in the block managed by PT Chevron Pacific Indonesia.

Acting director general at energy and mineral resources (EMR) ministry, Ego Syahrial revealed, the project has a value of up to US$5 billion. He said, the decision to leave the project caused Chevron could no longer extend the exploitation contract in the Rokan Block in August 2021.

“If he has already proclaimed it is now being offered to ENI. IDD and Rokan block are one package,” he told reporters on August 5.

Chevron is the operator and majority shareholder of the IDD project, hold of 63 percent. The remaining shares are owned by ENI, PT Pertamina Hulu Energi, and partners.

A number of fields will be developed in the second phase of IDD, including the Ganal Block with the Gendalo-Gehem Field and the Rapak Block with the Gehem and Bangka Fields. The Bangka Project has been in production since last August 2016 with an installed capacity of 110 million cubic feet of gas and 4,000 barrels of condensate per day.

The IDD project was initiated in 2007 and Chevron is trusted to be the contractor to develop deep sea gas in the Gendalo-Blok Ganal field and the Gehem-Blok Rapak field. Proposals for the project development plans keep changing along with fluctuations in world oil prices, from $6.9 billion to $12 billion, then dropping to $5 billion.

The news about ENI‘ entry had actually been revealed in mid-2019. Early of this year, the Italian giant oil and gas producer has aborted the downstream projects with state-owned energy firm, PT Pertamina.

Last year, both has signed an agreement to build green refinery based on crude palm oil also business trading opportunities in oil and gas, and other products. ENI has been present in Indonesia since 2001, conducting operations of exploration and production.

Today production derives from Muara Bakau block (Eni owned 55 percent interests) where Jangkrik field started-up in 2017. ENI has get approval on the Plan of Development for the Merakes field located in the East Sepinggan PSC in the Makassar Strait, East Kalimantan.

EMR ministry has granted the approval just three months after the submission of the plan and less than eleven months after the producer started production from its deep water operated asset in Indonesia, the Jangkrik fields complex in the Muara Bakau PSC.

The Merakes field that is estimated to hold about 2 trillion cubic feet of lean gas in place is located in 1,500 meters water depth, 35 kilometers South West of the Jangkrik Floating Production Unit. The field has been discovered by the Merakes 1 well in 2014 which encountered lean gas in world class reservoir quality sands of Pliocene age.

In January 2017, Eni successfully drilled and tested the appraisal well Merakes 2. The POD foresees the drilling and completion of six subsea wells and the construction and installation of subsea systems and pipelines which will be connected to the Jangkrik FPU.

The gas will then be shipped through the existing pipelines from the Jangkrik to the Bontang LNG Processing facility operated by PT Badak in the East Kalimantan. Merakes production, likewise that of Jangkrik will contribute to the life extension of the Bontang LNG facilities, one of LNG processing plant which supplies LNG to both the domestic and export markets.

ENI also the operator of East Sepinggan through its subsidiary, East Sepinggan Ltd., which holds 85 percent Participating Interest, while PT Pertamina Hulu Energy, unit of Pertamina, holds the remaining 15 percent.

Indonesia is currently facing a widening gap between fuel consumption and production, raising concerns that if this condition persists and there are no breakthrough policies to narrow the gap, Indonesia will always be vulnerable to external shocks in years ahead, especially if there is a spike in oil and gas prices.

At present Indonesia consumed about 1.6 million barrels per day (bpd), while domestic production reached only around 800,000 bpd, therefore Indonesia has to import to cover the shortfall. The oil production is declining and will only accelerate if there is no major investment to carry out new explorations to add reserves.

It is not only oil that is alarming, natural gas production is also on the same path. Currently, the natural gas production tends to stagnate, while demand is on the upward trend. As a result, Indonesia may be forced to import natural gas or LNG in the next years. Thus, Indonesia is in dire need of more investment.

Indonesia has witnessed a number of global players left the country such as Canadian-based oil and gas player Niko Resources, Hess of U.S. and few other players. Some major players decided to divest their assets such as Chevron Corp., by offloading its geothermal assets in West Java.

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