Oil and Gas Exploration in Central Java New Governor Era

cepu-1MAY 27, 2013

CEPU –We just went through the central Java gubernatorial elections. But unfortunately during candidate debate (Wednesday, May 22 or 4 days before election day) none of the three candidates was talking specifically about oil and gas issues in the Central Java province

Also during campaigns, the candidates did not mention oil and gas management. All candidates much more to offer public service improvement programs, education, and health. Though Central Java has potential reserves of oil and gas. There are several blocks of oil and gas reserves are in the exploration stage, but there are some that have been exploited.

Reserves blocks that have been exploited include Randugunting block where some part of its hollow included in Blora and Rembang district area , Gundih block  Grobogan district and Cepu block (partially it’s hollow belong to  Bojonegoro district East Java). The problem is, It’s non-linear with a contribution to the Central Java budget, which in 2012 was more than Rp 10 billion.

Currently, there are at least two blocks that have oil and gas considerable to be exploited in order to provides a significant contribution to provincial budget. First; Proyek Pertamina Pengembangan Gas Jawa (PPGJ) in Kradenan Blora district

The exploitation by PT Pertamina to supply gas through a pipeline grid from Desa Sumber Kradenan Blora District until to Tambaklorok Semarang, the distance about 140 km. The project is claimed to be the largest gas projects in Southeast Asia with a value of Rp 12 trillion. Maximum capacity of gas production wells in the village an estimated 65 million cubic feet per day.

Second, Cepu Block. Different than PPGJ, all elements in central Java still need work harder to improve Cepu block management. Because until now  Government official of Blora Regency as the owner of mining area (WKP) Cepu Block together with  Central Java Provincial Government official has not got revenue-sharing (DBH) of oil and gas managed by PT Mobil Cepu Limited (MCL), a subsidiary of ExxonMobil.

The Causes, Law No. 33, 2004 on Fiscal Balance between the Central Government and Local Government mandates for the distribution of funds should be based on the Mouth Location of oil and gas. Currently the only wells in Kalitidu east Java exploited by MCL. Although Blora and Central Java has 36% mining area (WKP), those two government officials have not received revenue-sharing (DBH) yet.

Though we only have the 36% of WKP, Cepu Block is not a small. Research by the Indonesian Geologists Association (IAGI) mentions Cepu oil reserves reached 830.778 MMBOE or half of Bojonegoro reserves reached 1566.282 MMBOE.

In 2012, with production of approximately 22 thousand barrels per day from the Cepu Block, Bojonegoro regency already gets revenue sharing funds of Rp 70 billion. Compare with Blora district that got nothing yet”, given the contribution of oil and gas in the same year” only” Rp 3.5 billion. Looking at the reality of it,  It needs  urgent advocacy works, either by Blora regency, Central Java Provincial Government, and other  regency / city government official in the province.

There are several strategies in order Central Java soon get  revenue-sharing (DBH) from Cepu Block. First; To push PT. Mobil Cepu Limited (MCL) as operator of the Cepu Block, to immediately exploit oil and gas fields in Blora region. Automatically through this affirmation , Blora regency and Central Java Provincial Government will get revenue sharing.

Second, to force PT. Mobil Cepu Limited (MCL) to hand over  oil and gas fields that has been explored but not exploited to another operator, in this case to PT Pertamina. It could be a pretext of MCL activities that until now still focus on Banyuurip Bojonegoro  field. Now, there are 4 fields  in Cepu Block map, so-called A, B, C, and D field have not touched by MCL.

Roads Improvement

Third, To allocate special allocation fund (Dana Alokasi Khusus- DAK) of oil and gas to the most affected area. This impulse as compensation to areas that do not receive funding based on the regulation but these areas negatively impacted by Oil and gas exploitation

Fourth, To revise Law No. 33, 2004. Options related to the revision of the law consisting of regulation that revenue-sharing is given based on the mining area (of WKP), not the location of the wells mouth of extracted oil and gas.

Besides DBH issues, participating interest (PI) of Cepu Block remains a problem that must be guarded. Participating interest (PI) of Cepu Block, Central Java agreed  to have 1. 09% of share,  and it managed by Regional state owned Company (BUMD) PT Sarana Pembangunan Jawa tengah (SPJT). Of this  participation first; public must involve in guarding SPJT transparency in conveying information and data. Second, to establish new Regional state owned Company (BUMD) to manage participating interest, separating it from SPJT management.

However, the effectiveness and efficiency of this plan should be reviewed carefully considering which new enterprises are not burdened for the development of business profit. The oil issue has now become the responsibility of the new governor of Central Java, and deserves to be a priority if province programs really want to promote prosperous society.

Mohammad Khamdun, Activist of Lembaga Penelitian dan Aplikasi Wacana (LPAW) Blora – Central Java

(quoted from suaramerdeka.com Monday, May 27, 2013)