In less than 72 hours, PT Pertamina Hulu Rokan (PHR), a subsidiary of Pertamina Upstream Subholding (PT Pertamina Hulu Energi) will replace PT Chevron Pacific Indonesia (CPI) managing the Rokan Block in Riau. On Monday, August 9, 2021, Pertamina made history again. The company is trusted by the government to manage the oil and gas field after the contract has expired. Previously, in 2017, PT Pertamina Hulu Mahakam took over the management of the Mahakam Block in East Kalimantan from Total E&P Indonesie.
Controversy over the transfer of the Rokan Block contract from CPI to PHR had adorned the news since the Indonesian government decided not to extend the CPI contract in the Rokan Block in 2018. For 36 months the polemic over the transfer of management of the Rokan Block to Pertamina adorned the coverage of conventional media and online media. I do not know how many tens of thousands of news that aired.
Not a few parties doubt PHR’s ability to manage the Rokan Block from CPI. In addition to the continued decline in oil production from the Minas Field and Duri Field, PHR will also operate the oil and gas block whose operations are in the five districts using a Production Sharing Contract with a Gross Split scheme. The use of PSC Gross Split, of course, requires a level of effectiveness and efficiency in the company’s operations.
Apart from that, PHR must also prepare various strategies to ensure that production from the Rokan Block does not decrease if it needs to be increased. Moreover, the field there is already mature. Drilling activities must be carried out on a massive scale. Provision of rigs must also be ready at the time of transfer. This includes the issue of ex-CPI HR who will join PHR.
What and how are the PHR projections after managing the Rokan Block in the midst of the need for large enough funds to operate the oil and gas field with the second largest national oil production? What kind of partners should PHR cooperate with so that the partnered company can support the company’s efforts to increase the production performance of the Rokan Block?
To find out about this issue, Dunia Energi journalist Dudi Rahman interviewed Salis S Aprilian Ph.D., an oil and gas practitioner and has worked for the Pertamina Group for more than 28 years, Saturday (7/8). While serving as President Director of PT Pertamina EP (2008-2011), Salis successfully raised the company’s oil production and had time to penetrate the level of 130 thousand barrels per day. This oil engineering graduate from the Bandung Institute of Technology was also quite successful when he led PT Pertamina Hulu Energi (2011-2013) and PT Badak NGL (2015-2018). This doctoral from Texas A&M University, USA is also the former Chairperson of the Society Of Indonesian Petroleum Engineers (IATMI).
Here’s an excerpt.
In less than 72 hours, PT PHR will take over the management of the Rokan Block from PT Chevron Pacific Indonesia (CPI). How do you see PHR readiness?
I can only read from the outside through articles in various mass media as well as direct chat with the President Director of PHR Mr. Jaffee A. Suardin, and attended several webinars that he attended. In my opinion, they are ready, both technically and non-technically.
Perhaps there is a potential that the PHR is not ready yet. In what sector?
Maybe about the funding. I don’t know yet whether Pertamina is sufficient to fund all routine work and new projects (Exploration and EOR) with high technology that has been launched in the Rokan Block. Information about that only Pertamina insiders knows of course.
What acceleration can be done to overcome this?
If it is true that the funds are not sufficient, of course, Pertamina must have the courage to open itself to seek selective partners who can provide external funding by sharing risks and revenues.
Under the management of PHR, the Rokan Block applies a Gross Split PSC. In your opinion, what should PHR do besides being effective and efficient in operational activities?
Besides being effective and efficient, it must also be reliable and safe. The operational reliability factor is closely related to work safety and security as well as environmental protection (K3LL). Among the extraction industry, this oil and gas activity includes a high level of risk. Savings without being accompanied by knowledge of the impact can lead to fatal events.
Production of the Rokan Block is still around 160 thousand barrels per day, a free fall compared to 10 years ago which was 400 thousand barrels per day. There is an impression that CPI has let the production of the Rokan Block decrease because it knows that before 2018 the management of the Rokan Block will not be extended and transferred to a state-owned oil and gas company. What are PHR’s efforts to increase, at least maintain the production of the Rokan Block?
The Rokan Block actually has more than 100 oil fields. Even though it has been in production for decades (about 70 years), the previous operator (CPI) only concentrated on dozens of fields. This means that there are still some fields, even though they are categorized as small, which can be further developed. And this can increase production, besides having to be able to withstand the rate of decline in production in large fields (Minas, Duri, Bangko, Balam, Petapahan, and others) which naturally must occur.
Can the Rokan Block increase its production back to the level of 200 thousand barrels per day?
Maybe, but of course, you have to work hard.
What should PHR do?
In addition to implementing the well-proven EOR technology, it also reactivates oil fields that have been neglected so far. There must be a data re-visit, remapping in detail which layers have the potential to store oil and have not been produced, or have been produced but still leave oil (the technical term is by-passed oil).
Apart from drilling more wells with various methods, what else should PHR do?
Since most of the fields are mature, what is needed is an advanced oil recovery (EOR) study in all fields. I’m sure they’ve done that. It’s just a matter of implementation, by prioritizing according to the availability of funds and risk factors. Things like this will be easier and more accurate when using Artificial Intelligence (AI) or Machine Learning (ML). The use of ‘digital technology 4.0’ will greatly help engineers work more effectively and efficiently.
In order for the production of the Rokan Block to increase, why not just be “beaten up” by the Pertamina Group to manage the Rokan Block with PHR lead. For example, PDSI, Elnusa, Pertagas immediately entered the Rokan Block under the control of PHR?
As long as everything runs professionally, fairly, competitively, legally corrected, and transparently, why not? Because each Pertamina subsidiary also has its own KPI (key performance indicators). There must be a target for revenue, profit and loss, EBITDA, etc. So, can it be synchronized? This must also respect the Law or Regulations related to Business Competition, of course.
Is it possible to appoint directly or without tender to a subsidiary company of the Pertamina Group?
There are conditions and justification for a direct appointment, even though the scheme applied is Gross-Split. If these requirements are met, then just go ahead.
How do you see BUMDs that have 10% Participating Interest (PI) in the Rokan Block?
Yes. This is a requirement stated in the Oil and Gas Law. The aim is to share capital and risk and generate business in the region. The 10% PI not only gets a share of the profits from the management of oil and gas activities in the region but also has to deposit a percentage of capital. Well, if BUMD can manage it, then it can grow and develop economic activities in the area. On the other hand, if you are not good at managing it, it will cause problems, because the oil and gas business is high risk. High costs, uncertain subsurface reserves, fluctuating oil prices.
How is the support of BUMD and the Regional Government for PHR so that operational activities in the Rokan Block run smoothly as well as the management of the Cepu Block?
Because BUMDs and regional governments receive a share of 10%, both from capital and production, they are required to know the planning and realization of their activities. Indeed, if it is possible, it will not reach the technical and strategic side, because they have handed over the management (operatorship) of the Rokan Block to Pertamina (in this case PHR). BUMD and local governments can play a more active role in supervising and suggesting local content in terms of procurement, community development through CSR programs, and management of profit-sharing funds (DBH) obtained from oil and gas activities to develop non-industrial activities. more sustainable oil and gas.
In order for the production of the Rokan Block to be maintained and even increased, of course, a conducive atmosphere is needed both within PHR and Partners, as well as the Central and Regional Governments, the Ministry of Energy and Mineral Resources, and SKK Migas. How to minimize conflicts in the regions, especially since we know that there will be many demands, starting with local companies getting involved in projects, increasing CSR funds in the area of operation, prioritizing local residents to work in PHR, etc. Your response?
All of that is the responsibility of BUMD and the local government. So, there should be good coordination between what the community expects (aspirations), either through certain groups or communities or through their representatives in the DPRD, and what is run by the company. All complaints and input from the community should be accommodated and coordinated by the BUMD and the Regional Government, then the brand conveys it to the company. Thus, Pertamina, as the operator who is responsible for operational implementation, is not burdened with social problems that can actually be coordinated well by its partners in the regions, namely BUMD and Regional Government.
PHR is also said to be seeking partners. It is said that one of the national conglomerates will become PHR’s partner. According to you?
If Pertamina does not have sufficient financial capital, it must partner with those who have money. It’s common business. But of course, you have to be selective because this is an oil and gas business that contains a lot of risks. If possible, look for partners who also have sufficient experience and technology to jointly develop the Rokan Block so that half of the road can be said to have been completed, namely choosing the appropriate technology by sharing the risk together based on the paid-in capital.
What kind of partner is right for PHR?
In addition to having strong funds, the partners chosen must also be experienced in managing oil and gas fields with the support of the latest technology that has proven successful.
Why not just invite Chevron to be a partner or another multinational company? Doesn’t the management of the Rokan Block require a large investment while the reserves in the oil field continue to decline?
I can’t answer that. But I think Pertamina has considered this, including from a legal and political perspective. Perhaps. (DR)***
Quoted from dunia-energi.com, with the title “PERLU CARI MITRA BERPENGALAMAN DAN TEKNOLOGI YANG CUKUP
Salis S Aprilian, Mantan Dirut PHE: Dari Sisi Teknis dan Non-Teknis PHR Siap Kelola Blok Rokan” on the link https://www.dunia-energi.com/salis-s-aprilian-mantan-dirut-phe-dari-sisi-teknis-dan-non-teknis-phr-siap-kelola-blok-rokan/