Indonesia has pinned its hopes on Italy-based oil and gas supermajor Eni to take over the multibillion-dollar deepwater development (IDD) project in the Makassar Strait by March 2021 at the latest, right on the heels of Chevron’s exit. Upstream Oil and Gas Special Regulatory Taskforce (SKK Migas) head Dwi Soetjipto said on Feb. 3 that SKK Migas estimated ENI to conclude ongoing talks with Chevron by the end of the first quarter. “For the IDD, it looks like Eni will be the potential buyer,” he said at a hearing with the House of Representatives in Jakarta. “By 2021, the operator can extend the forward contract for the block and discuss the IDD plan of development.” The gas-rich project is partly located on the Ganal Block and Rapak Block, whose current production sharing contracts (PSC) are slated to expire on Feb. 23, 2028, and Dec. 3, 2027, respectively.
Dwi noted that Eni would likely integrate the IDD project with its existing facilities in the Kutai basin. The Italian company also runs the Jangkrik Field in the neighboring Muara Bakau Block within the same basin. The US$6.98 billion IDD project is slated to produce 27,000 barrels of oil per day (bopd) and 844 million standard cubic feet per day (mmscfd) of gas starting late 2025.
Eni is currently a minority holder of the IDD consortium with a 20 percent share, while Chevron holds 62 percent and China’s Sinopec the remaining 18 percent. The government expects Eni to replace Chevron after the latter reaffirmed plans to exit the IDD project in 2020. The IDD was not attractive enough for Chevron during that year’s record-low oil price environment. Chevron’s reaffirmation struck a second major blow to Indonesia’s upstream oil and gas dreams after Netherlands-based Shell made a similar move in the same year with the Masela Block, another nationally strategic project. Indonesia aims to double its gas production to 12,300 mmscfd by 2030 in becoming a major liquefied natural gas (LNG) exporter in the Asia Pacific. “We believe the project will have value for another operator and the Kutai Basin can continue to be developed safely and responsibly. However, at this stage, no final decision has been made,” Chevron Indonesia spokeswoman Soenitha Poernomo told The Jakarta Post on Feb. 4. Eni declined to comment. Upstream oil and gas analyst Andrew Harwood of energy consultancy Wood Mackenzie previously said that Eni was a potential buyer for the IDD project and could synergize the project with its Jangkrik operations. “However, any buyer would need assurances around the extension of the IDD licenses, which are set to expire in 2028/2029. Some level of fiscal incentive may also be required to improve the economic viability for the IDD,” he said via email on Aug. 6.
