Govt supports KUD, BUMD to develop old wells
Saturday, January 25 2014 - 06:46 AM WIB
The KUDs and BUMDs which are interested to develop old wells may submit applications to the contractors which own the block where the wells are located, with the copy of the applications sent to the Directorate General of Oil and Gas.
?If the contractors accept the request, we will immediately process (the permit),? Naryanto Wagiman, Director of Oil and Gas Program Management said earlier in the week at a meeting to evaluate the country?s crude lifting target.
Naryanto acknowledged that there is a misleading perception among the public that operating old wells is illegal for non-contractors. In fact, KUD and BUMD may operate such wells provided they have received permits from the government.
Naryanto warned however that KUD and BUMD which have received the permits should care about security aspects in their activities.
By law, old wells are defined as ones which were drilled before the year 1970, used to make production, and situated in a PSC working area and where activities by the PSC have stopped.
?The government is seeking to optimize production including from old wells. Priorities should be given to KUD and BUMD for the development of old wells in order to improve the welfare of local communities,? he said.
The development of old wells is regulated by the MEMR Regulation No. 01/2008. Based on the regulation, if a permit has been given the MEMR through the Directorate General of Oil and Gas, it should be followed up with an agreement on production between the PSC contractors and KUD or BUMD.
The permit is valid for five years and can be extended for another five years. The MEMR is obliged to extend the permit.
The KUD and BUMD can start production once they have signed agreement with the PSC contractors. Production from the old wells should be delivered to the contractors and the KUD and BUMD are entitled to some fee based on the agreement with the PSC contractors.
Until now, several agreements have been signed by PSC contractor with KUD or BUMD. Throughout 2012, the MEMR issued five permits for KUD to produce oil from a total of 280 wells.
Indonesia has a total of 13,824 wells, consisting of 3,623 wells in southern Sumatra, 2,392 wells in northern Sumatra, 1,633 wells in central Sumatra, 3,143 wells in East Kalimantan, 100 wells in South Kalimantan, 2,496 wells in the Central Java, East Java and Madura regions, 208 wells in Papua and 229 wells in Seram.
Editing by Johannes Simbolon