SKK Migas, ONWJ contractors locked in disagreement
Friday, November 13 2015 - 03:28 PM WIB
The government has agreed to extend the contract on Offshore North West Java (ONWJ) PSC but the government and the contractors remain in disagreement over the terms of the extension contract. As a result, the extension contract remains unsigned until now, a senior official of the Ministry of Energy and Mineral Resources.
The contractors requests that they may be allowed to operate the block on the ?block basis? rather than the ?Plan of Development (PoD) basis? during the extension period. Upstream authority SKK Migas however is still reluctant to meet the request.
"Discussion is ongoing over the issue. SKK Migas has sent a letter to the ministry, asking whether the contractors may operate the block on a ?limited block basis?. In response, we said that in that case, areas that have not been explored in ONWJ block should be taken out of the block," Upstream Director at the ministry Djoko Siswanto said recently.
?Block basis? is a term used in the PSC system to refer the scheme in which contractors are allowed to aggregate all the expenses incurred in all fields of the block to get reimbursement from the government through cost recovery. Meanwhile, ?PoD basis? refers to the scheme in which contractors are only allowed to get cost recovery for the expenses incurred in each PoD. A block may have several PoDs.
Djoko said the government has agreed to extend the contract of the block with the current operator, PT Pertamina Hulu Energi (PHE), receiving the largest stake. The existing contract expires in 2017.
After the contract extension, PHE will get a 73.5 percent interest in the block, up from 58.25 percent at present, while IDX-listed PT Energi Mega Persada Tbk?s (EMP) interest will be cut to 24 percent from 36.75percent, and PT Risco Energy ONWJ Ltd (Kupfec) 2.5 percent. As the government has allowed the West Java administration to get a 10 percent stake in the block, each of the firms will hand over some of their interest to the province. PHE will give 7.35 percent interest, EMP 2.4 percent, and Kupfec 0.25 percent.
Editing by Johannes Simbolon