Chevron Corp. (NYSE: CVX) will exit the Makassar Strait gas block in the Indonesia Deepwater Development (IDD) offshore natural gas project to focus on more promising areas in the venture, Indonesian officials said July 11.
Indonesia's energy minister had issued a decree terminating Chevron's Makassar Strait production sharing contract after it decided not to extend its operation of the block beyond 2020, upstream oil and gas regulator SKKMigas said.
"Chevron was not interested in requesting an extension," SKKMigas chairman Amien Sunaryadi told reporters. "Their preference was [to exit]."
Chevron did not immediately respond to a request for comment.
The IDD project began production from the Bangka Field in late 2016, but the Makassar Strait block, one of three blocks in the project, is not in production.
"There was a discovery [of hydrocarbons]" in the Makassar Strait block's Maha oil field, Sunaryadi said, "but in the calculations of NPV [net present value] it was negative."
"Compared to the others, this is small," he said.
The IDD project eventually aims to reach daily peak production at 1.1 billion cubic feet of natural gas and 31,000 barrels of condensate.
There are currently plans to develop the Gendalo and Gehem gas hubs in the two remaining blocks, Rapak and Ganal, off the coast of East Kalimantan.
Sunaryadi said the government is discussing the budget for the IDD project development plans, where it must approve any anticipated recoverable costs in the project.
Indonesia's deputy energy minister said late last month that Chevron intended to cut its planned investment in the projects to around $6 billion from $12.8 billion, but noted that the cuts would not impact its production targets.
The Indonesian government plans to tender the Makassar Strait block "as soon as possible", said Djoko Siswanto, the energy ministry's director general of oil and gas.
Pertamina Upstream Director Syamsu Alam said the state energy holding company was "currently evaluating" the block but hadn't yet decided if it wanted to assume the role of operator.