Indonesia has asked US major Chevron to re-evaluate the investment required for its offshore Indonesia Deepwater Development project in the Makassar Strait, as it considers the investment figure of $12 billion as too high amid a low oil price environment, a senior official at upstream regulator SKK Migas said Friday.
"They [Chevron] still referred to [a] previous [crude] oil price of $100/b. They proposed $12 billion. We asked them to recalculate the investment needed with the current situation," SKK Migas' planning deputy chief Gunawan Sutadiwirja said.
SKK Migas also sees the IDD project coming on stream after 2020.
"They haven't got any market. On the other hand, we see 2020-2025 will be fully LNG market," Sutadiwirja said.
Chevron's IDD project offshore East Kalimantan includes three PSC blocks: Ganal, Rapak and Makassar Strait, and the development of five gas fields, namely Bangka, Gehem, Gendalo, Maha and Gandang.
The Makassar Strait PSC expires in 2020, Rapak in 2028 and Makassar Strait in 2027.
Chevron has asked the government to extend these three PSCs to allow the project to be economically viable.
The first stage of IDD, namely Bangka field is expected to produce its initial output at 120 MMcf/d of gas and 2,880 b/d of condensate in 2016.
Chevron plans to invest about $700 million to develop the Bangka field, S&P Global Platts has reported.
Meanwhile, Indonesia had rejected Chevron's request to have 240% of investment credit for the IDD project.
The energy and mines ministry sees the investment credit as not more than 100% even though IDD is a deepwater project which is more difficult compared with onshore projects, an official at the ministry who declined to be named said Friday.
Investment credit will allow contractors to recover an investment credit amounting to a certain percentage of the capital investment costs directly required for developing production facilities.
Chevron had first secured approval for the IDD's development plan from Indonesia in 2008, based on an investment estimate of $6.7 billion.
But the investment cost ballooned by 83.6% to $12.3 billion, resulting in Chevron having to resubmit its development plan to the government in 2014.
The sharp rise in investment had caused the government to undertake a long discussion and had not taken any decisions until Chevron is willing to revise it following an increase in gas reserves. The company had resubmitted the new development plan recently, Platts has reported.
The IDD project, which is expected to contain 2.3 Tcf of gas reserves, was originally scheduled to come on stream in 2018 and had been expected to be delayed to 2020, because of the revision of the development plan.
