Peciko start-up caps Total Indonesia Mahakam program

Oct. 16, 2000
Completion of Phase 1 of the giant Peciko gas field development off Indonesia's East Kalimantan is a major milestone in the long history of Total Indonesia.

Completion of Phase 1 of the giant Peciko gas field development off Indonesia's East Kalimantan is a major milestone in the long history of Total Indonesia.

The company, the Indonesian upstream unit of Franco-Belgian supermajor TotalFinaElf SA, contends the project is the first of its kind to develop an infrastructure for a large-scale, integrated field development project that covers the production chain from wellhead to processing units and then to an LNG plant.

Mahakam PSC history

Peciko development warranted an eighth liquefaction train at Indonesia's giant Bontang LNG complex. The eighth train came on stream in November 1999, 1 month before Peciko start-up, to supply new LNG contracts with Japan, South Korea, and Taiwan that extend to 2010.

At the same time, Total Indonesia, after being Indonesia's second largest oil producer, has now become its largest gas producer. From Bekapai gas field start-up in 1974 to Peciko start-up this year, it is the Mahakam production sharing contract area off the Mahakam River delta area (which Total Indonesia owns 50-50 with Japan's Inpex Ltd.) that is the source of this prolific supply.

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About 1 billion bbl of oil and condensate and over 4 tcf of natural gas have been produced in environments that vary from swampy terrain at Handil and Tambora fields; to shallow waters at Tunu; to moderate-depth waters in the Bekapai, Sisi, and Nubi areas; and to deeper waters at Peciko (Fig. 1).

Discovered in 1991-after Tunu gas field, which is now in Phase 7 of production and gearing up for Phase 8-the Peciko project was launched in 1996 to boost Total Indonesia's gas production capacity to meet new LNG contracts. It differs from Tunu in that it is being developed offshore in 30-50 m of water. The field lies 60 km northeast of the city of Balikpapan and southwest of Bekapai in the Makassar Straits.

Peciko details

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Of all the producing fields in the Mahakam River delta, the Peciko field is unique in that gas trapping is both structural and stratigraphic. The reservoir section consists of a series of very fine to medium-grained sands scattered throughout deposits of shale and siltstone, and the main productive sequence lies at a depth of 2,100-3,000 m.

Well productivity is very high, averaging 80 MMcfd. Field development initially involved two offshore platforms from which 16 wells were drilled. Full development will entail ultimately about a dozen unmanned platforms

Gas and condensate are shipped via pipeline to the onshore Senipah Peciko Process Area (PPA), integrated with and located just south of the Senipah oil and export terminal that has operated since 1977. After processing, the gas is sent through a 42-in., 86-km gas pipeline to the Bontang LNG plant. The condensate is separated and stabilized and sent via tanker to the Senipah terminal from where it is shipped in the same way as is the crude oil from Handil and Bekapai.

Phase I of Peciko is planned to produce a maximum of 800 MMcfd of gas and 16,000 b/d of condensate.

A further development stage, to be completed by yearend 2001, will involve installing a third offshore wellhead platform and drilling nine additional development wells to increase production to 1 bcfd. This production level will be maintained over the next 2 years.

It will then be gradually increased to as much as 1.3 bcfd by 2004, with an average rate of 900 MMcfd. This will require additional platforms, the drilling of new wells, and additional production facilities. This third phase is currently being refined for project approval by yearend 2000.

Beyond Phase 3, the development scheme will bring to about 80 the total number of wells drilled over a period spanning 15 years at a cost of some $1.4 billion in surface facilities and development wells.

Mahakam PSC operating costs have been brought down since 1992 from $2/boe to a little over $1/boe in 2000. By 2004-05, they will be down to $1/boe of which 85% represents technical costs and the balance for administration and overhead. There is a severe cost-cutting program under way throughout the contract area.

This takes into account not only the synergies to be drawn within each field but also the cross synergies from all fields, whether oil or gas. This also allows for a more rational distribution of the local personnel trained by Total Indonesia.

Production outlook

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With Peciko, production from gas fields operated by Total Indonesia will rise from 2.15 bcfd in 2000 to 2.6 bcfd between 2004 and 2010 (Fig. 3).

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The bulk of this supply is intended for the Bontang LNG plant, which is owned 10% by Total Indonesia, now its largest supplier (Fig. 4); 55% by Indonesia's state oil company Pertamina; and the balance by two other East Kalimantan operators, Virginia Indonesia Co. and Unocal Corp. (Fig. 5).

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The Makaham PSC is Indonesia's most prolific hydrocarbon area (Fig. 6). Overall initial hydrocarbon reserves are estimated at 5.7 billion boe (proved) and 6.95 billion boe (proven plus probable).

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Last year, the Mahakam PSC produced 130,000 boe/d, of which 84% was natural gas. Oil production from Bekapai and Handil oil fields peaked at 230,000 b/d in the late 1970s and is now in decline, currently averaging only 23,000 b/d.

Sophisticated measures at Mahakam oil fields involving gas lift, water and gas injection, recompletions, and stimulations have managed to bring recovery factors to around 45%. A new stage of tertiary enhanced oil recovery EOR was to get under way this year in five reservoirs in Handil field, involving dry gas from Peciko injected in already waterflooded reservoirs. In addition, a $20 million air injection pilot was to begin testing last July in one of Handil's reservoirs, a first in Indonesia. If successful, the process will be extended to other reservoirs.

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Proven and probable gas reserves in the Mahakam area, on the other hand, are estimated as high as 31 tcf, accounting for 40% of Indonesia's reserves. So far, only 16 tcf has been sold within existing LNG contracts (Fig. 7). Japan accounts for 60% of Bontang contract volumes, South Korea and Taiwan the rest. Gas is also delivered to methanol, urea, and ammonia plants near Bontang.

LNG market prospects

With its capacity to supply further clients, Total Indonesia is mulling construction of a ninth LNG train at Bontang, which would cost $700 million and produce another 3 million tonnes/year of LNG, mainly from its own gas production. The project, which would take Bontang's LNG capacity to 25 million tonnes/year, can get off the ground only if and when a new large client is found.

While this was easy before the Asian crisis and before other LNG projects targeting the Far East had materialized, times have changed; it is now a buyer's market. Indonesia's LNG success could, in effect, be its undoing: It provides half of Japan's and South Korea's LNG; both countries now wish to diversify their supply sources and have a large choice: Malaysia, Brunei, Australia, and even the Middle East.

Marketing its uncommitted gas is one of the challenges facing the company. Christophe de Margerie, vice-president of exploration and production of TotalFinaElf, does not discount Japan, South Korea, and especially Taiwan renewing their contracts when they expire within the next 10 years. Meanwhile, he is eyeing the Chinese market, where the firm is in line, as are other oil majors, to build an import terminal for LNG. India is also a possible future buyer; Total already has a stake in a future LNG terminal project there.

But while the Mahakam PSC is one of TotalFinaElf's "core assets"-accounting for 25% of the company's global production in 1999-it is also, together with the North Sea, a critical source of its cash flow. Asia, as a whole, with 7% of the world's gas reserves, is central to its gas strategy. These reserves, pointed out de Margerie, have been steadily growing: during 1988-99 the firm's gas reserves grew by 32%, essentially concentrated in Malaysia, Indonesia, and Australia (placing them close to large markets).

TotalFinaElf is the fourth biggest hydrocarbon producer in Asia after ExxonMobil Corp., Royal Dutch/Shell, and Chevron Corp., with an investment budget this year of 8 billion euros, two thirds of which is for the upstream.

Exploration, Asia strategy

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In Indonesia TotalFinaElf continues to pursue its exploration effort, with an emphasis on gas in a country where both domestic and export demand for gas is on the rise (Fig. 8).

In addition to the Mahakam PSC, TotalFinaElf is exploring six other acreages: Tengah, as operator with a 22.5% stake; Walo, with 100%, where 3D seismic is being interpreted; Sabo, 30%, with operator Japan Petroleum Exploration Co. Ltd. 60%; North Sokang, 100%, where a wildcat will be drilled this year; Saliki, operator with 50%; and Sebawang, operator with 50%.

Elsewhere in Asia, the group has had production in Thailand and Myanmar since the early 1990s. Through the former Total SA's merger with Elf Aquitaine SA, it now holds a gas field in Brunei, off Maharaja, which came on stream early last year. Through its earlier merger with Petrofina SA, it also holds three exploration blocks in Viet Nam and deepwater acreage off Pakistan. All told, TotalFinaElf operates 420,000 boe/d of Asia production, of which 20% is oil and 80% gas.

Christophe de Margerie believes it is important for TotalFinaElf to maintain its strong positions in Asia and not let new entrants such as BP overtake it in this market.

"Thankfully," he noted, "the Asian crisis has slowed down some competing projects, such as Exxon[Mobil]'s Natuna project in Indonesia."