REL Oil and Gas Pte Ltd (REL), a wholly owned subsidiary of the Singapore-based Eneco Energy Ltd plans to divest 100 percent participating interest in the West Jambi block, located onshore South Sumatra - Photo by the Company

JAKARTA (TheInsiderStories) – REL Oil and Gas Pte Ltd (REL), a wholly owned subsidiary of the Singapore-based Eneco Energy Ltd plans to divest 100 percent participating interest in the West Jambi block, located onshore South Sumatra, said the company last week. RISC A&D Pty. Ltd., has been appointed as an advisor for the participating interest sale.

The block is located in the northern part of the hydrocarbon-rich South Sumatra basin, tectonically known as the back-arc basin. The asset is split into two areas, West Jambi I and West Jambi II. The block sits in a proven region for oil and gas exploration with transportation infrastructure nearby, such as the Trans Sumatra Pipeline, which directly intersects the asset.

Eneco executed a production sharing contract (PSC) with state-owned energy producer, PT Pertamina, giving the company the rights to explore and exploit the asset for 20 years. The company controls 100 percent of working interest and is the operator of the West Jambi block.

The producer entered the energy sector in 2008 with the goal of becoming a significant energy producer in Indonesia. Now, shortly after embarking on this journey, the company has a portfolio of oil and natural gas assets in Indonesia and is already seeing the benefits of its actions. Beside in South Sumatera, Eneco also has assets in West Java.

After implementing PSC scheme since 2017, now Indonesian government reopens cost recovery scheme. According to the energy and mineral resources minister Arifin Tasrif said on Friday (01/10). Currently, both schemes of contracts could be applied in the block auction process.

In a cost recovery-based on PSC, the government reimburses companies for upstream-related costs in exchange for a higher share for each company’s earnings from exploiting domestic oil and gas blocks. While, in the so-called gross split scheme, companies bear upstream costs themselves, but the government receives a smaller cut of revenue determined in advance.

Under the gross-split scheme, profit splits between the government and contractors will “slide” up and down depending on several factors. Some of the factors include the status of the field, location, reservoir depth, reservoir type, amount of carbon dioxide, use of local industrial content and stage of production.

These variables will be added or subtracted from the base calculation, in which the new regulation was set to at least 43 percent for companies in oil projects and at least 48 percent in gas projects. Under the cost recovery scheme, investors were entitled to 15 percent of the profit of an oil project and 30 percent of a gas project, with the government scooping up the rest.

Written by Staff Editor, Email: theinsiderstories@gmail.com