Oil production from Cepu block, the nation’s largest oil deposit, will reach its preliminary target of 20,000 barrels a day in August as a land dispute hampering the project has been resolved, a senior official of upstream oil and gas regulator BP Migas said on Tuesday.
A land acquisition dispute pitting state oil and gas company PT Pertamina and ExxonMobil Cepu - the joint operators of Cepu block - and the district government of Tuban, East Java, has delayed the laying of 10 kilometers of pipes to carry oil from Cepu to a storage facility in Tuban, after the local government refused to give the operators permits to construct a section of a pipeline through the district.
The project is key to increasing production at Cepu to up to 20,000 bpd.
The Cepu field, located on the border between Central Java and East Java, was originally expected to deliver 20,000 bpd by January and gradually increase to peak production of around 165,000 bpd in 2012. Current production remains insignificant at only 1,000 to 2,000 bpd. Owing to permit problems, the operators are using a temporary storage facility with a capacity of only 5,000 bpd.
“The 32-km pipe construction from Palang to an oil storage facility in Mudi, Tuban, has finished,” said Abdul Muin, the deputy head of upstream oil and gas regulator BPMigas.
Following the completion of the pipe construction, Cepu’s output needed to wait for the completion of a mini-storage plant with a capacity of 6,000 bpd, by private oil and gas company PT Tri Wahana Universal (TWU), Muin said.
“The construction depends on materials being delivered from the United States, which are expected to arrive on July 3 or 4,” Muin said. “So, output from Cepu block should pick up in August.”
Of the 20,000 bpd expected output, about 14,000 bpd of the oil extracted at Cepu will be refined in facilities jointly owned by Pertamina and PetroChina in Mudi, about 35 kilometers from the block. The rest of the oil will be processed at a small onshore refinery owned by TWU.
The consortium is renting the facilities at Mudi until its permanent facility, allowing peak production, is ready.