Pertamina capitalizes on improved gross split PSC terms to take over Rokan, says GlobalData

Following the news (Tuesday 31 July) that Pertamina will replace Chevron in 2021 as sole participant in the license for Rokan, Indonesia’s largest crude producing block, Jonathan Markham, Oil & Gas Analyst at GlobalData, a leading data and analytics company, offers his view on how new fiscal terms in Indonesia affect the profitability of this development:

“Taking on Rokan fits with Pertamina’s mandate to increase its role as an upstream operator domestically, but this also poses a risk for the government given the target of doubling production to 500,000 barrels per day of oil for the license using enhanced oil recovery techniques such as steam flood and chemical injection. The national company will need the technical knowledge and available budget to maximize recovery rates in Rokan.

“With the Rokan project, Pertamina will benefit from 2017 adjustments to the gross split production sharing contract (PSC) aimed at encouraging investment in Indonesia’s mature fields, which are vital production centers for the country. The new terms offered by the gross split PSC significantly improve the economics of the Rokan project, bringing the breakeven price down to US$26 per barrel from US$34 under the original gross split production sharing contract from 2016.

“These improved terms explain the rationale behind the significant signature bonus, US$784mn, which Petrmaina bid for Rokan to secure the license.”