A “Win-Win” Commercialization of Marginal Fields in Indonesia by Pertarnina, Migas, and YPF-Maxus Energy
Herucokro T. M., John Girgis, Jeff Aldrich, Budiyento Thomas, Marlina Sambas, 2000. "A “Win-Win” Commercialization of Marginal Fields in Indonesia by Pertarnina, Migas, and YPF-Maxus Energy", International Oil and Gas Ventures: A Business Perspective, George E. Kronman, Don B. Felio, Thomas E. O’Connor, Mindy S. Kronman
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In the early 1990s Pertarnina, Indonesia’s National Oil Company and YPF-Maxus, an international exploration company as contractor to Pertarnina and operator of the southeast Sumatra (SES) production sharing concession (PSC), recognized the opportunity to unlock substantial economic potential in numerous fields that were discovered yet were non-commercial under the current cost and contract environment. These fields were discovered over the 25-year history of the contract area during several exploration campaigns. Technical reasons for the non-commercialization of these fields varied from size, logistical difficulties, type of oil and reservoir quality.
Several other companies had recognized similar opportunities in Indonesia, but traditional negotiations for government-based incentives were not successful. A different approach was needed. Based on the success of previous multi-disciplinary teams that YPF-Maxus used in SES, Pertarnina and YPF-Maxus formed a joint multi-disciplinary team to explore new ways to commercialize what were termed marginal fields. The team was selected and charged to find new ways to address this issue. It was recognized that work was needed along several fronts: financial, geo-technical, and facility paradigms had to be examined. Different types of financial incentives were studied to improve the risk/reward equation for the contractor.
The results were the introduction of a new marginal fields incentives formula, the agreement to use current incentives in the contract previously given only to new fields and to commercialize several “waves” of marginal fields. These incentives, along with dramatic reduction in costs, enabled the companies in the PSC to commercialize over ten fields to date with additional fields currently being considered. The economic results from these fields exceeded the anticipated results and yielded substantial economic benefits to both Indonesia and the YPF-Maxus partnership. Today these fields have already produced over 12 million barrels of oil and current production ranges from 15,000 to 20,000 BOPD. More fields are being analyzed and a Marginal Fields Incentives package is being considered by the Indonesian government to be adopted on a wider basis.
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