(TheInsiderStories) – Italia’s Eni announced the approval of the Plan of Development for the Merakes field located in the East Sepinggan PSC in the Makassar Strait, East Kalimantan.
Based on the company statement, the Minister of Energy and Mineral Resources (MEMR) has granted the approval just three months after the submission of the plan and less than eleven months after Eni 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 (FPU).
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 FPU 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.
“Today’s approval of the Merakes POD is a milestone for the development of our most recent discovery in the Kutei Basin. It is a fundamental step to progress towards the Final Investment Decision of the projec,” aid Eni’s CEO, Claudio Descalzi in a press statement on April 18.
Eni is the operator of East Sepinggan through its subsidiary Eni, East Sepinggan Limited which holds 85 percent Participating Interest while PT Pertamina Hulu Energy holds the remaining 15 percent. Eni has been operating in Indonesia since 2001 and currently has a large portfolio of assets in exploration, production and development.
Production activities are located in the Kutei Basin, East Kalimantan through the Jangkrik field of Muara Bakau working area that provides an average production in excess of 600 million standard cubic feet per day.
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.
Of the investment in 2017, only $180 million was invested to conduct explorations and $9.33 billion for maintaining production. Based on the MEMR data, investment in oil and gas declined significantly from $20.72 billion in 2014 to $10.18 billion in 2017.
The main reason behind the declining was the plunge of oil price four-five years ago to below $50 per barrel. This has triggered major oil and gas players in the world to downsize operations, divest assets and lay-off jobs to stay afloat. This was also happening in the country.
During the past few years, 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.
The EMR Ministry has set an investment target of $17.04 billion in the oil and gas sector this year, consisting of $14.44 billion in the upstream oil and gas and $2.59 billion in the downstream sector. The question is can the government achieve the target?
One step needed to help revive the investment is finalizing the amendment of the Oil and Gas Law. This is now the third year, the planned amendment of the Oil and Gas Law is included in the National Legislation Program for the period of 2004-2019.