Plans for new onshore wells stymied by land law: SKKMigas

Amahl S. Azwar, The Jakarta Post, Jakarta | Headlines | Thu, March 28 2013, 9:15 AM

Government plans to boost hydrocarbon reserves by drilling new onshore oil and gas wells will be hindered by the law on land acquisitions passed in 2011, an official has said.

Rudi Rubiandini, the head of the upstream oil and gas regulatory special task force SKKMigas, said on Wednesday that the law, which comes into force this year following the issuance of an enabling legal basis last August, would lengthen the land acquirement process for the oil and gas industry.

“The law clearly disturbs our plan for exploration nationwide,” Rudi said. “The regulator is currently trying to discuss the issue with relevant stakeholders to speed up land acquisition procedures for upstream businesses.”

“This is also crucial to ensure that the state’s revenue from the oil and gas sector will not be harmed,” Rudi said.

The Land Acquisition Law, passed in December 2011, was intended to accelerate land procurement for public infrastructure projects, such as toll roads.

To the dismay of the local oil and gas industry, the law affects land acquisitions for upstream activities, including drilling.

While drilling may only take a month, land acquisition under the law might take more than a year. One article of the law, for example, provides for a 538-day process to clear one hectare of land for the public interest.

The law, according to SKKMigas operations deputy Muliawan, might lead to a failure to reach the regulator’s target to drill 1,178 development wells and 253 exploration wells in 2013 to boost hydrocarbon reserves amid maturing production at existing wells.

“At least 60 oil and gas wells — most of them onshore exploration wells — were slated to be drilled at the beginning of this year, but the prolonged land acquisition process might delay them,” Muliawan said.

Without massive drilling this year, the nation’s hydrocarbon reserves of 3.59 billion of barrels oil equivalent would be exhausted within the next 11 years, SKKMigas has said.

Rudi said that the regulator would push for the upstream oil and gas industry to be exempt from the law by increasing the minimum 1-hectare threshold to between five and 10 hectares.

“While the land needed for drilling activity spans more than 1 hectare of land, the total space [required] would not be more than 10 hectares,” Rudi said.

Oil and gas companies have expressed their dislike for the law, which they claim will hurt upstream activity this year.

Pertamina EP spokesman Agus Amperianto said separately that while the firm, an upstream subsidiary of state-run energy firm PT Pertamina, had previously established a target of drilling more than 300 basins this year, most might now be delayed.

“Under the new land rules, we can only start drilling those wells in 2015, instead of 2013, as per the original target,” Agus said.

Even before the Land Acquisition Law was passed in 2011, the nation had made little progress in finding new reserves in recent years.

Only 80 new wells were discovered last year, far below the government’s previously established annual target of 250 wells.

Further, only 51 of the new wells were deemed promising.

Indonesia, which resigned from the Organization of Petroleum Exporting Countries (OPEC) after becoming a net oil importer, has planned to lower its oil output target for the current year to 840,000 barrels per day (bpd), down 6.66 percent from the original target in the state budget of 900,000 bpd.

The government has been relying on the US-based ExxonMobil’s Cepu block in East Java, which is projected to generate an additional 165,000 bpd for Indonesia by the end of 2014, to boost the nation’s oil output to a level of 1 million bpd next year.


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