24 January 2020 (closed)
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Crude oil production at the Banyu Urip field (part of the Cepu Block) in East Java has reached 201,000 barrels of oil per day (bpd). This peak is reached about three years after operations started at the Banyu Urip field. Considering Indonesia set a 825,000 (bpd) oil production target in the state budget, it implies the Banyu Urip field now accounts for almost a quarter of total (targeted) crude oil production across Indonesia.
Originally, the Banyu Urip field was expected to reach its peak production rate in August 2015. However, technical difficulties as well as riots at the site caused a long delay. This delay was a burden for authorities as the field - containing an estimated 725 million barrels of oil - is the largest existing oil field in Indonesia and therefore a vital asset for the government.
Over the past two decades the Indonesian government saw domestic crude oil production slide heavily due to limited investment in exploration. The main reason for weak appetite for exploration in Indonesia's oil and gas sector is the complex and uncertain investment climate of Indonesia where there exists a high degree of bureaucracy (red tape) and high level legal uncertainty. Meanwhile, for big oil and gas projects Indonesia is still rather dependent on foreign expertise and capital.
The Banyu Urip field brings some life back into Indonesia's oil output. Recently, Indonesian Energy and Mineral Resources Minister Ignatius Jonan said he hopes to see oil production at the Banyu Urip field rise to 300,000 bpd soon. The field is operated by ExxonMobil Cepu Limited which owns a 20.5 percent stake. Other stakeholders in this USD $2.5 billion project are Pertamina EP Cepu (45 percent, a subsidiary of Indonesia's state-owned enterprise Pertamina), Ampolex (24.5 percent), and the local government (10 percent).
The central processing facility at the Banyu Urip field can now process up to 220,000 bpd. To increase this figure further it will require a new environmental impact analysis (Amdal) certificate.
Erwin Maryoto, Vice President Public and Government Affairs at ExxonMobil Indonesia, says there are 45 wells at the Banyu Urip field, consisting of 30 production wells and 15 injection wells. The field also produces natural gas, but in relatively limited quantities. This gas is actually used to fuel power stations in the project area.
Maryoto also said production costs at the Banyu Urip field are the lowest in Indonesia as it only requires USD $2.4 to produce one barrel of oil. Data from Indonesian upstream oil and gas regulator SKKMigas show that the average production costs for one barrel of oil in Indonesia are USD $18. The Banyu Urip field manages to keep costs low as the various wells are located within short distance, while there has not been a shutdown that disturbed production. Moreover it has just started to produce and therefore the oil can now still be fetched with limited costs and technology. Hence, with the crude oil price around USD $50 per barrel, production at the Banyu Urip field is lucrative.
Currently the US oil giant Exxon Mobil Corporation is only involved in the Cepu Block after having returned the East Natuna Block to the government.