Eni's Indonesia Gas Project to Start Up in 2021: Deputy Minister

JAKARTA (Reuters) - Indonesia's deputy energy minister said Eni aims to start output of natural gas in 2021 from its offshore Merakes project, which includes construction of subsea systems and pipelines to transport production to a floating production unit (FPU) approximately 22 miles (36 km) away.

New twin subsea pipelines will connect Eni's Merakes project to the Jangkirk FPU (photo: Eni)

Initial production at Merakes would be 155 MMcf/d, rising to a forecast peak output of 391 MMcf/d, deputy minister Arcandra Tahar said. The targets are part of an amended development plan for the East Sepinggan block in the Makassar Strait under a new production sharing contract that is expected to be completed before Dec. 12, he said.

In April, Eni announced its approval of the Plan of Development (POD) for the Merakes field and said the minister of Energy had granted approval just three months after submission of the plan.

Eni's POD foresaw six subsea wells and the construction and installation of subsea systems and two 28-mile (45-km) pipelines that will be connected to the Jangkrik FPU. The gas will then be shipped through the existing pipelines to the Bontang LNG processing facility operated in East Kalimantan.

As part of the revision, the contractors have agreed to adopt a gross split scheme, whereby Eni and its partner Pertamina would take 67 percent of crude oil and 72 percent of natural gas production from the project, and the Indonesian government would take the rest, Tahar said. 

It was not immediately clear what split was set previously. A spokesman for Italy's Eni did not immediately respond to a request for comment on the matter.  

The amendment would be the first time a conventional cost-recovery production-sharing contract in Indonesia is converted to use the gross split scheme, Tahar said.

"By using the gross split scheme, it will be simpler and they don't need a lengthy tender process, so they see it as an opportunity," Tahar said, referring to Eni's proposal to make the switch, which he said had been received two weeks ago.

Indonesia recently adjusted its gross split mechanism for new and expiring oil and gas production sharing contracts, whereby contractors shoulder the cost of exploration and production, rather than being reimbursed by the government.

The changes were intended to attract investment amid tepid interest in Indonesia's energy tenders and after the industry pointed to more attractive opportunities in other countries.

Tahar said the Merakes project has an estimated 814 billion cubic feet of natural gas reserves and an economic lifetime of around nine years.

Eni holds an 85 percent participating interest in the contract via its local unit Eni East Sepinggan Limited, while Indonesia's Pertamina has 15 percent. With the revision, the contract duration up to July 19, 2042, will not change, Tahar said.

- Reuters with P&GJ staff report

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