PHE seeks to revise West Madura block contract

PT Pertamina Hulu Energi (PHE), an upstream subsidiary of state-owned oil and gas firm PT Pertamina, has proposed to the upstream regulator SKK Migas for a revision of its production sharing contract (PSC) in the West Madura offshore block, Koran Tempo reported on Tuesday.

The paper quoted PHE President Director Gunung Sardjono as saying that the company was seeking to change the PSC from plan of development (POD) basis to block basis to improve the economic feasibility of the project.

Under the POD scheme, contractors are allowed to only propose plan of development for a single field, while under the block basis, plan of development can cover the entire work area. Cost recovery under the POD scheme also only covers expenses in one field, while under the block basis, expenses for activities in the entire work area as set in the plan of development are reimbursed by the state.

Gunung said that PHE has applied for the region of the West Madura block contract in August of last year. He said that the block basis is expected to help encourage contractors to carry out exploration activities.

He said that exploration activities to find new reserves are crucial for PHE as production at the West Madura block has been on a declining trend. He expected that oil production at the block this year to decline to 10,000 bpd from 13,000 bpd, while gas expected to fall to 102.3 mmscfd from 103.5 mmscfd. PHE acquired the block in 2011, with a contract that last until 2031. PHE teams up with Kodeco Energy and PT Mandiri Madura Barat in developing the block.

SKK Migas spokesman Elan Biantoro acknowledged that the block basis should be applied to the West Madura block contract to help improve the economic feasibility of the project. (*)