ExxonMobil to sign $6b investment deal for East Natuna

By Godang Sitompul

Courtesy of ESDM

ExxonMobil is expected to sign today an agreement to invest up to US$6 billion in the development of the East Natuna block, in Riau Islands Province, in cooperation with state-owned oil and gas firm PT Pertamina, according to a source.

The source told Petromindo.com that the signing of the agreement will be witnessed by visiting US Vice President Mike Pence, Indonesian Vice President Jusuf Kalla and Minister of Energy and Mineral Resources Ignasius Jonan.

?The signing will be made today before US vice president and Indonesia vice president,? the source said, but did not provide further details.

Deputy Minister of Energy and Mineral Resources Arcandra Tahar said on Thursday that the government has firmly demanded for an output split from the planned East Natuna block project, a request which been rejected by a consortium assigned to develop the block.

He said, however, that the consortium wanted the entire output from the project to be allocated for consortium members due to the huge investment requirement of up to US$24 billion in developing the block, while the government can get tax. ?This kind of things need to be further discussed,? he said.

Founded in the 1980s, the East Natuna block, formerly called Natuna D-Alpha block, the government terminated in 2005 the previous contract of ExxonMobil-led consortium due to long-delay in the development of the project. The government then assigned earlier this year state-owned oil and gas firm PT Pertamina to lead the consortium, whose members including ExxonMobil and PTT of Thailand, in a bid to accelerate the development of the block. The three companies, however, have yet to decide on their respective shares in the consortium. Arcandra said that this issue is expected to be concluded within the next one or two months.

The consortium is currently in the process of completing a technology and market review of the planned development of the East Natuna block, located in Riau Islands Province, as the high carbon dioxide content in the block has made the project to be more complex both in terms of technology and commercial. Completion of the review is necessary before the consortium proceeds to the next steps.

Senior Vice President for Upstream Business Development at Pertamina, Denie S. Tampubolon said that the technology market review is expected to be concluded in the middle of this year.

The East Natuna block, formerly called D-Alpha, is estimated to hold up to 200 tcf of gas reserve, the largest gas reserve ever found in Indonesia. However, only 46 tcf of the gas is said to be recoverable due the high CO2 element contained in the reserve. In the early phase, the consortium aims to accelerate oil production with a target of 7,000-15,000 bopd once the PSC has been signed.

Arcandra earlier said that good news is expected for the East Natuna block project with the visit by Pence to Indonesia.

Editing by Reiner Simanjuntak