Full steam ahead in IndonesiaFebruary 21, 2018
Daniel Wieczynski, president-director of ExxonMobil, talks to TOGY about the company’s current operations, the ease of doing business in Indonesia and how the company is adding value to the country’s well being. ExxonMobil is heavily invested in all aspects of the nation’s oil and gas industry.
On upstream: We continue to encourage Indonesia to enhance its upstream competitiveness relative to other countries. ExxonMobil continues to be a significant investor in ASEAN nations and the Asia Pacific region, and we would love to see Indonesia compete more favourably to attract additional upstream investment.
On the investment climate: We appreciate the strong progress within the energy ministry and SKK Migas on permitting simplification, better co-ordination with industry players and efforts to improve regulatory efficiency. On the other hand, better co-ordination is needed between ministries, as it is still sometimes difficult to resolve issues outside of the energy sector’s control.
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Daniel Wieczynski below. Click here to read more Can you tell us about your company’s key projects in 2016 and the first semester of 2017? Can you give us details into your operations on the Banyu Urip field? Will ExxonMobil be pursuing production on the East Natuna block? What steps has the government made in regards to the ease of doing business within the oil and gas industry and rejoining OPEC? How has ExxonMobil contributed to developing knowledge transfer and local content? For more information on the Indonesian market, including upstream opportunities, the government’s plan to raise power generation capacity and investment conditions, see our business intelligence platform, TOGYiN.
Talking about our key projects in 2016 and 2017 is just a brief snapshot of ExxonMobil’s 120-year-long commitment to Indonesia as we and our predecessor companies have been operating here in Indonesia since 1898.
Currently, we are focusing our efforts to support to the government of Indonesia in meeting Indonesia’s energy needs to fuel its tremendous economic growth. ExxonMobil is proud to work with the government of Indonesia and our Cepu Block partners to now produce over 25% of Indonesia’s national oil production safely and reliably.
Last year, we continued to look for ways to maximise production from Cepu block, both by continuing to debottleneck our processing facilities and, in subsurface management, to ensure safe and reliable operations with no additional environmental impact. As a result of these efforts, we successful produced over 204,000 barrels of crude oil per day at the Banyu Urip field, which was more than 20% higher than our plan of development commitment.
The next Cepu block oil project is the Kedung Keris field. The field was discovered in April 2011, approximately 15 kilometres from the Banyu Urip field. The field is expected to add 20 million barrels of recoverable oil, with up to 10,000 barrels of oil per day of production. We just received authorisation for financial expenditure approval from SKK Migas in August 2017, and are now in the process of tendering the engineering, procurement and construction contract to execute the project to deliver first oil in late 2019.
In addition to our upstream business, our downstream business in Indonesia is also growing rapidly. We successfully entered the fuels market for industrial and commercial customers in 2016 and are rapidly increasing our sales volumes. Our chemicals company supplies over 600 kilotonnes of chemicals every year to Indonesia. And we are working to grow our Mobil lubricants business into one of Indonesia’s top brands.
Our main Banyu Urip facilities started up in Q4 2015 following a long and steadily increasing early oil effort that commenced in 2008. As we have operated the full field facilities over the past two years, we continue to see excellent well performance and – based on our technical assessments – have increased the estimated ultimate recoverable oil reserves from 450 million barrels of oil at final investment decision (FID) announcement in 2012 to 729 million barrels of oil today.
We have seen strong well performance and reliable operations that have allowed us to increase daily production to more than 200,000 barrels of oil per day, exceeding the plan of development basis of 165,000 barrels of oil per day with a tremendous safety record of a zero total recordable incident rate. It is a world-class safety record.
Following approval of an updated environmental impact assessment from the Ministry of Environment and Forestry, we are now delivering an average daily production of above 200,000 barrels of oil. Our 2017 lifting totalled 204,800 barrels per day.
No additional capital cost and a minimal operating cost increase was required for the higher capacity and average daily production rate. Banyu Urip has the lowest production cost in Indonesia. With 420 talented upstream employees, we are the most efficient and productive international oil company workforce.
On the East Natuna block, ExxonMobil – jointly with Pertamina and PTT EP Thailand – have completed the technology and market review on the block. The findings have been reviewed with the government. The technology and market review was a comprehensive assessment of the latest technologies, development concepts and gas market conditions relevant to the development of the East Natuna area.
Despite technology improvements and significant cost reductions, development of the block remains a challenging project, requiring prices far higher than those projected in the long term by credible industry analysts.
Having completed the technology and market review and evaluated the results, ExxonMobil no longer wishes to continue further discussions or activity involving the East Natuna area.
We appreciate the strong progress within the energy ministry and SKK Migas on permitting simplification, better co-ordination with industry players and efforts to improve regulatory efficiency. On the other hand, better co-ordination is needed between ministries, as it is still sometimes difficult to resolve issues outside of the energy sector’s control.
All parties to PSC agreements should respect the sanctity of the contracts and should not unilaterally impose new obligations and exceptions or otherwise alter the terms of existing contracts via subsequent laws or regulations. It is important for countries to demonstrate stability of contracts and regulatory certainty in order to attract investment.
I believe the government knows what is best for the country with respect to rejoining OPEC or not.
What is the investment climate in Indonesia?
We continue to encourage Indonesia to enhance its upstream competitiveness relative to other countries. ExxonMobil continues to be a significant investor in ASEAN nations and the Asia Pacific region, and we would love to see Indonesia compete more favourably to attract additional upstream investment.
In ExxonMobil, we have our national content strategy. The strategy develops local companies, workforces and communities adjacent to our operations.
For the Banyu Urip operations, we hired the best local talent from East and Central Java including from the Banyu Urip host regencies – Bojonegoro, Tuban and Blora. We started the programme in batches. During 2007-2009, there were more than ten thousand applicants. The carefully selected 110 best local applicants were then trained in ExxonMobil’s affiliates in the US, Canada, Chad-Cameroon, Malaysia and Aceh operations in Indonesia. They learned directly from our global experts, gained field experience and returned to successfully commission, start up and operate the Banyu Urip facilities.
During Banyu Urip project development phase, to ensure the development of local companies, each of the five leading EPC consortium companies driving the construction of this project were led by Indonesian companies. ExxonMobil partnered with these companies to enhance their engineering, procurement and quality control services in order to handle a project of this magnitude and, more importantly, to be able to build the capacity for these firms to work on future projects.
Banyu Urip also utilised the first drilling rigs fully designed and constructed in Indonesia. Not only were these rigs built in the country, but they operated with world-class safety performance. We are very proud of the fact that something designed and built in Indonesia worked so successfully.
Additionally, the Banyu Urip project utilised 460 Indonesian subcontractors – from catering services, to supply management to marine services – and over 17,000 Indonesian workers.
I am very proud to say that not only do we have a worldclass workforce, but over 95% of our employees are now nationals and 85% of supervisory and managerial positions are nationals. We are also proud to have Pertamina as our partner in Cepu Block, and to date, over 70 personnel from Pertamina have been embedded in our organisation as secondees.
How has ExxonMobil made the step towards LNG potential in Indonesia?
In 2017, we signed a liquefied natural gas sales and purchase heads of agreement with Pertamina, covering terms for the long-term supply of LNG starting in 2025 to support Indonesia’s continuing strong economic growth. The heads of agreement is another positive milestone in the decades-long strategic partnership between ExxonMobil and Pertamina. The 20-million-tonnes-per-year LNG sales heads of agreement, along with the signing of other business agreements, was witnessed in the presence of Indonesia’s Vice-president [Jusuf] Kalla and US Vice-President [Mike] Pence.
How strong is ExxonMobil’s commitment to its Indonesian operations?
We remain committed to our Indonesia operations and continue to seek and evaluate new opportunities in the country. At Banyu Urip, ExxonMobil is proud to work with the government of Indonesia, Pertamina EP Cepu and Badan Kerjasama Blok Cepu / BKS (a consortium of local government companies) to now produce more than 25% of Indonesia’s national oil production.
We are progressing our next oil project in the Cepu block – Kedung Keris – which will deliver an additional 20 million barrels of production starting in the late 2019. We also continue to grow our lubricants, fuels and chemicals marketing businesses in the country. Indonesia is a very important country to ExxonMobil, and we continue to work hard to power her – both today and into her very bright future.
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Can you tell us about your company’s key projects in 2016 and the first semester of 2017?
Can you give us details into your operations on the Banyu Urip field?
Will ExxonMobil be pursuing production on the East Natuna block?
What steps has the government made in regards to the ease of doing business within the oil and gas industry and rejoining OPEC?
How has ExxonMobil contributed to developing knowledge transfer and local content?
For more information on the Indonesian market, including upstream opportunities, the government’s plan to raise power generation capacity and investment conditions, see our business intelligence platform, TOGYiN.