PHE in talks with authorities over unrecovered cost in ONWJ block

By Godang Sitompul

PT Pertamina Hulu Energi (PHE), an upstream subsidiary of state-owned oil and gas firm PT Pertamina, is in talks with the Directorate General of Oil and Gas at the Ministry of Energy and Mineral Resources (MEMR) and upstream oil and gas authority SKK Migas over some US$450 million worth of expenses spent in Offshore North West Java (ONWJ) block prior to the expiry of the block?s earlier contract.

?We?re still in discussions over unrecovered investment spending including for drilling and production facilities when the contract had not yet been terminated,? PHE President Director Gunung Sardjono told Petromindo.com.

Under its previous contract, the government reimbursed production and operating expenses via the so-called cost recovery mechanism. The previous contract expired on January 18, 2017. The government then transferred the entire block to PHE ONWJ, but applied a gross-split scheme in the new contract, under which expenses are no longer reimbursed.

PHE through subsidiary PT PHE ONWJ previously held a 58.27 percent in ONWJ block in West Java as operator, while Kuwait Foreign Petroleum Exploration Company (Kufpec) owned 5 percent interest, and PT Energi Mega Persada (EMP) had more than 36 percent.

Editing by Reiner Simanjuntak