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Local government in Indonesia blocks access to PetroChina oil and gas wells

BY DEDEN SUDRAJAT AND I MADE SENTANA

JAKARTA -- A local government in Indonesia has blocked access to 14 oil and gas wells at a block in central Sumatra operated by a local unit of PetroChina, an official at the country' s upstream oil and gas regulator said, further highlighting the problems investors are facing as the country struggles to prop up its crude oil production.

Crude oil production at the Jabung Timur [Block] is still going on. Only access to the wells is being blocked Elan Biantoro, spokesman for SKKMigas, told Dow Jones Newswires.

SKKMigas is a unit of Indonesia' s Ministry of Energy and Mineral Resources tasked with overseeing the upstream oil and gas sector.

Still Mr. Biantoro said SKKMigas is concerned that the blockage is obstructing maintenance work at the wells, which could undermine their safety.

He added that SKKMigas has sent a team to negotiate with the local government, hoping that access to the wells, which produce a combined 1,500 boepd, will be opened.

Kompas daily quoted Sudirman, spokesman for the Tanjung Jabung Timur government office, as saying they are blocking access to the wells because they haven' t issued "location permits" for them and PetroChina failed to honor an agreement to sell natural gas to a power plant owned by the local government. Mr. Sudirman, who like many Indonesians goes by only one name, couldn' t be reached for confirmation.

However, Novie Latanna, spokeswoman for the local subsidiary of PetroChina, said in a press release that the existing wells already had location permits.

Mrs. Latanna said the company applied for location permits for drilling of new wells nine months ago.

While waiting for the new permits, PetroChina is not drilling any wells in those areas she said.

She added that the company, together with SKKMigas, is preparing to sell natural gas to the local government.

The issue is the latest highlighting the difficulties faced by foreign companies in attempting to make inroads into Indonesia' s oil and gas sector.

Two Chevron contractors were sentenced to five and six years in prison, respectively, earlier this month for violating Indonesia' s environmental laws. Related trials for five Chevron employees who are allegedly involved in corruption at a project to remove oil particles and other waste from soil at the company' s field in central Sumatra will continue over the coming weeks.

Chevron said the soil remediation was government approved and successful. Chevron said the project cleaned up enough soil for the equivalent of 75 football fields.

Analysts said the ruling could end up discouraging much needed investment in the country' s oil sector and could have far reaching consequences for Indonesia' s oil and gas industry. Oil production for Indonesia, once a member of the Organization of the Petroleum Exporting Countries, has plunged more than 50% from the 1990s.

Dow Jones Newswires

05/27/2013

 

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