Oil weel drilling delay causes $600,000 in losses

Oil weel drilling delay causes $600,000 in losses

Leony Aurora, The Jakarta Post, Jakarta

The Joint Operation Body (JOB) of Sukowati oil field in East
Java has suffered around US$600,000 in losses as drilling of new
wells is put on hold pending an agreement with a local government
administration, which is demanding a 10 percent stake in the
field.

Drilling equipment in the oil field operated by JOB Sukowati
-- comprising state oil and gas firm PT Pertamina and Chinese oil
company PetroChina Co. -- has stood ready to use for a month,
vice-president of PetroChina's Indonesian unit Budi Setiadi said
on Wednesday.

"We have to pay for the standby rate," he said.

"It's $20,000 a day."

Budi said that JOB would set up meetings with the Bojonegoro
regency administration that has administrative authority over the
Sukowati village.

"The JOB's general manager is meeting the regent tonight
(Wednesday)," he added.

Since late March, the Bojonegoro regency has banned the
drilling of two new oil wells in the field, demanding a 10
percent production split.

The central government has said the inter-regional fiscal
balance law, which gives regencies a portion of generated output
from oil and gas fields located in their authority, does not
apply for Sukowati as the contract for the field was signed long
before the law was drafted.

An official of the Oil and Gas Upstream Regulatory Body (BP
Migas) has suggested that the regency be allowed to buy a 10
percent stake in the field through a business deal.

"Our position is not to have it (regional participation) for
this block," said Budi. "We (the project) have been going on (for
some time) and have already financial backers."

Budi said that the two existing wells in Sukowati continued to
operate, producing some 7,000 barrels of oil per day (bpd) in
total.

"We expect the two new wells to produce another 7,000 bpd," he
added.

Indonesia urgently needs to increase its oil output, which has
been steadily declining in the past few years due to aging fields
and lack of new exploration.