PEP wants to proceed with JTB field project despite absence of incentives

Courtesy of SEC

PT Pertamina EP (PEP) Cepu wants to proceed with the development of the Jambaran-Tiung Biru (JTB) field in Cepu Block, East Java, although the government has decided not to give incentives to the project, Kontan reported on Friday.

The paper quoted PEP Cepu President Director Ardiansyah as saying, however, that its key partner ExxonMobil, which holds a 45 percent participating interest in the project, may not agree to continue with the project without government incentives.

He explained that without government incentives the internal rate of return of the project drops to around 12-13 percent compared to the desirable level of around 16 percent with incentives.

He added that although the company has agreed to lower the gas price from the project to US$7 per mmbtu, from an earlier agreed price of $8 per mmbtu, there?s been pressure for further reduction as the government has set a policy to reduce gas price for certain industries to $6 per mmbtu, which could further harm the feasibility of the project.

ExxonMobil officials could not be reached by the paper for comments.

PEP Cepu is the operator of the JTB project, which is expected to start gas production in the first quarter of 2019. The Tiung Biru field is located within PEP Cepu?s operations area which is adjacent to the giant Cepu oil and gas block jointly operated by ExxonMobil Cepu Limited (EMCL). The Jambaran gas field is located within the Cepu block. EMCL and PEPC agreed in September 2012 to unitize both fields with PEPC serving as operator.

Pertamina is set to become the first buyer of the entire planned 170 mmscfd of gas output from the JTB project, which was originally targeted to start production in the first quarter of 2019, after state-owned fertilizer firm PT Pupuk Kujang canceled its earlier plan to buy 70 mmscfd of the planned output. (*)