Credit: Chevron's Official Website.

JAKARTA (TheInsiderStories)Chevron Pacific Indonesia decided to withdraw Makassar Strait block in the Indonesia Deepwater Development (IDD) project due to poor investment return.

Upstream Oil and Gas Regulatory Special Task Force Chairman Amien Sunaryadi said on Wednesday (11/07)  the American company had completed a study to continue the contract in Makassar Strait block. One of the mechanisms studied is to combine the Makassar Strait l with the Indonesia Deepwater Development (IDD) project because one of the fields in Makassar Strait is also included in the IDD project of Maha field.

However, the integration of the block to the IDD project made the business return drops. The nett present value (NPV) of the project becomes negative if combine with Rapak and Ganal blocks.

Therefore, Chevron was asked to compose a new proposal of Makassar Strait without including the IDD project. However, based on Chevron’s calculations, there is no change in Makassar Strait’s economy.

“Then Chevron prefered Makassar Strait removed from IDD project,” he added.

There are three production sharing contracts (PSC) in the IDD project namely Makassar Strait, Rapak, and Ganal. Makassar Strait is the smallest part of the IDD megaproject that is included in the national strategic projects. Field Maha so far has been discovered only the smallest volume of oil and gas than other fields such as Gendalo or Gehem.

Director General for Oil and Gas Djoko Siswanto said Chevron is not interested to continue its contract even after Makassar Strait excluded from IDD. Other two existing contractors namely Pertamina and Sinopec already offered to manage the block but rejected it.

After the existing contractors and state-owned oil company PT Pertamina have expressed no interest, then the block will be re-auctioned.

Siswanto believed there are many companies who want to operate the block, especially companies that already have production facilities near Makassar Strait such as ENI Indonesian which is currently the operator in the Jangkrik field.

Chevron had 72 per cent of participating interest in Makassar Strait, while PT Pertamina Hulu Energy owned 10 per cent and Sinopec owned 18 per cent.

Chevron’s exit from Makassar Strait block could worsen Indonesia’s oil and gas production in the future. In 2017, oil lifting reached only 803,800 barrels of oil per day (bopd), lower than the target of 815,000 bopd, while gas lifting reached 1,140 thousand barrels oil equivalent per day (boepd), lower than the target of 1,150 thousand boepd.

Furthermore, the country’s oil and gas investment also showed a downward trend. Based on the energy ministry’s data, the total investment in the upstream oil and gas sector last year reached only US$9.33 billion, lower than the target of US$12.29 billion. Of these, only $180 million was invested in oil and gas exploration, lower than the target of US$870 million, and only US$9.15 billion was invested in oil and gas production, far lower than the target of US$11.42 billion.