Indonesia’s development boostMarch 23, 2018
Nanang Abdul Manaf, president-director of Pertamina EP, talks to TOGY about how the company operates, how it helps grow Indonesia’s economy and plans for 2018. The enterprise is the upstream offshoot of the country’s NOC and is involved in exploration and development across 20 Indonesian provinces and 155 regencies.
On efficiency: “There are two things that we must do to provide profit for our company. First, we should boost oil and gas production. Second, we should carry out activities efficiently in every sector. We still have the opportunity to reduce costs in the drilling programmes.”
On strategy: “My strategy, especially for 2018, is to be more aggressive in the first and second quarter in drilling development and exploration wells. To implement this strategy, we need to start preparing our 2018 targets now.”
On brownfield: “I believe that Pertamina EP is adding value in its ability to manage brownfield assets. We have the expertise to do it in the most efficient way possible, using the latest technologies available and the best workforce a company can get.”
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How does your company operate?
Pertamina EP is established as the subsidiary of Pertamina (Persero) as one the mandates of law of the Republic of Indonesia number 22 of 2001 regarding oil and gas. It was stated that Pertamina (Persero) must form a subsidiary that operates upstream and heritages the previous oil and gas working area of Pertamina, including signing a production-sharing contract with BP Migas, now SKK Migas, in order to continue exploration and exploitation activities in ex-Pertamina working areas. Basically, all Pertamina EP activities are in the upstream business, which consists of exploration, development and production phases. In the exploration activities, Pertamina EP is considered aggressive, with more than 150 exploration wells drilled since the beginning of Pertamina EP in 2006 and with more than a 75% success rate of hydrocarbons discovery. During this oil price downturn, Pertamina EP is still committed to aggressively explore in order to support and maintain current and future national production.
What are your production targets for next year?
We are currently producing around 77,000 boepd, and we have set a target to increase production by 4,000 boepd for next year. We are not complaining. Pertamina EP was recently approved to run four or five new PODs, or plans of development. In West Java, we have the three following PODs: the S3 complex, the Sarbom complex and the Garcia Wilcox complex. We also have new PODs in Central Java from exploration activities.
How is Pertamina EP contributing to Indonesia’s economy?
We believe that our activity impacts economic growth in specific areas. For example, let’s say we made a gas discovery in Central Sulawesi in Eastern Java. After the discovery, we would need to build new gas plant facilities. As a result, we would need labour and we would need more materials. This type of development produces a multiplier effect for the regional economies. That is why any of our activities that open in the area will likely result in economic growth. Secondly, as a business entity, we contribute to the economy by generating profits.
What is Pertamina EP’s contribution to the Pertamina group of companies?
Pertamina EP is one of the backbones from the upstream sectors of Pertamina (Persero). It contributes significant revenue to our holding company Pertamina (Persero). Pertamina’s net profit was around USD 3 billion, of which 20% of the net profit was generated solely by Pertamina EP. Pertamina EP generated almost USD 600 million. However, this amount is low compared to 2012 and 2013. During that period – given that the price of crude was over USD 100 per barrel and our production was approximately 120,000 bopd – Pertamina EP generated around USD 5 billion.
How has the company optimised to reap the greatest benefits from the crude that it produces in light of the economic downturn?
There are two things that we must do to provide profit for our company. First, we should boost oil and gas production. Second, we should carry out activities efficiently in every sector. We still have the opportunity to reduce costs in the drilling programmes. We must conduct a very detailed review of every single expenditure in drilling. We must also try to negotiate with services companies like rig providers. This year we managed to bring about very significant cost reductions in drilling activities.
What other methodologies is the company employing to bolster upstream success?
In order to support the production increase and improve the discovery of hydrocarbon resources, Pertamina EP implemented three main exploration strategies. The first is searching for significant resources, such as exploring the frontier area in Papua, offshore prospects in Matindok Sulawesi and even the deep reservoir objectives of existing fields. Secondly, accelerating the commerciality of discovered structures, especially in areas with high demand of energy, for example in Sumatra and Java areas. Thirdly, increasing the success rate of exploration by running comprehensive G&G [geology and geophysics] studies and seismic surveys in highly prospective areas before the execution of exploration drilling.
What is Pertamina EP doing to increase production of its mature assets?
We conduct detailed studies in specific areas. We add in seismic data to get more information. Once we are confident with integrated data, we apply new technologies. I believe that Pertamina EP is adding value in its ability to manage brownfield assets. We have the expertise to do it in the most efficient way possible, using the latest technologies available and the best workforce a company can get.
What is Pertamina EP’s strategy going forward?
My strategy, especially for 2018, is to be more aggressive in the first and second quarter in drilling development and exploration wells. To implement this strategy, we need to start preparing our 2018 targets now. I have already established a dedicated team, including subsurface petroleum engineers, legal advisers and supply chain contractors who will help with procurement. For the first time – on January 1, 2018, we can start – we should spud several wells.
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