Chevron Submits Proposal For The Extension Of Indonesia’s Rokan Oil Contract

A proposal has been submitted by Chevron with a view to extending the deal to operate Indonesia’s Rokan oil block, the country’s single biggest crude oil source, beyond 2021. This was disclosed on Friday by Arcandra Tahar, the country’s deputy energy minister. According to Tahar an evaluation of the proposal is now being conducted by SKKMigas, the upstream gas and oil regulator.

Chevron Indonesia’s government affairs senior vice president, Yanto Sianipar, also disclosed that discussions were being held by the oil major and the Indonesian government over a possible extension with regards to the Rokan oil block. According to Sianipar the oil major will continue to have a close working relationship with the Indonesian government in order to optimize oil production and recovery from the asset.

Recently Chevron got the approval required from the government over plans of drilling additional wells located in six fields – Sikladi, Ampuh, Pematang, Petpahan, Hitam and Sidingin. In 2016 Chevor had indicated that it would not be extending a deal for East Kalimantan block which it had been holding for a period of five decades. This came after a series of asset cuts among gas and oil firms in the Asian country.

East Kalimantan

“We have decided we will allow others to invest in East Kalimantan and we will focus our efforts where we believe we make a difference in a place like Rokan block and also in IDD,” the managing director of IndoAsia Business Unit at Chevron, Chuck Taylor, recently toldthe parliament of Indonesia.

According to Indonesia’s deputy energy minister the government was currently undertaking an evaluation of gas and oil contracts numbering 23 which are expected to expire within the next eight years. Per Tahar priority with regards to decisions will be given to those that are expected to expire shortly. One of the contracts that is expiring in the next five years is the one held by ConocoPhillips for Corridor block.

Gross split mechanism

Recently gross split mechanism was adopted by Indonesia both for expiring and new gas and oil production sharing contracts. In this regards the cost of production and exploration is shouldered by contractors rather than having the government reimburse them.

Indonesia has not clarified whether the mechanism will apply in the case of Rokan. However based on ministerial regulation it is possible for the government to apply the mechanism with regards to the contracts that are up for extension.