Pertamina told to acquire Exxon?s interest in JTB field project

The government has suggested an option for state-owned oil and gas firm PT Pertamina to acquire the interest of ExxonMobil in the Jambaran-Tiung Biru (JTB) gas field project in East Java to allow the project to start development, Bisnis Indonesia reported on Friday.

The paper quoted Pertamina Upstream Director Syamsu Alam as saying that the acquisition option was suggested amid differences between PT Pertamina EP (PEP) Cepu, an indirect subsidiary of Pertamina, as the operator of the JTB field project and its partner ExxonMobil Cepu Limited (EMCL)regarding the desired internal rate of return (IRR) of the project.

While Pertamina considers an IRR of 12-13 percent is sufficient for the project to be developed, ExxonMobil insists on an IRR of 16 percent.

?The government sees an option what if Pertamina talks to Exxon to take over the PI (participating interest) in the Jambaran-Tiung Biru field,? Syamsu said, adding that if Exxon is willing to release the interest and the price is right, Pertamina could make the acquisition.

PT Pertamina EP (PEP) Cepu holds a 45 percent operating interest in the JTB field project, while EMCL holds another 45 percent PI, and the remaining 10 percent is jointly held by four local administrations in Central and East Java.

The government has decided not to provide incentives for the development of the JTB field, causing the IRR of the project to be lower than the initially projected of 16 percent.

The paper quoted Vice President for Public and Government Relations at ExxonMobil Oil Indonesia, Erwin Maryoto as saying that his company has yet to be informed about the government?s plan for Pertamina to acquire its interest in the JTB field project.

PEP Cepu has already said it wants to proceed with the development of the JTB field in Cepu Block although the government has decided not to give incentives to the project. PEP Cepu President Director Ardiansyah however, said that ExxonMobil may not agree to continue with the project without government incentives.

The JTB project 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, after state-owned fertilizer firm PT Pupuk Kujang canceled its earlier plan to buy 70 mmscfd of the planned output. (*)