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Decommissioning Workshop Surabaya 25 – 27 August 2004 (organized by BPMIGAS – facilitated by ConocoPhillips). Agenda. Day 1 Opened by Mr. Rachmat Sudibdjo - Head of BPMIGAS

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Decommissioning WorkshopSurabaya 25 – 27 August 2004(organized by BPMIGAS – facilitated by ConocoPhillips)


Day 1

  • Opened by Mr. Rachmat Sudibdjo - Head of BPMIGAS
  • Talk Show – 1 : - Cost mechanism post operation from regulation point of view (among others Mr. Tjetjep Muljana was representing TI)
  • Presentations :
    • Premier oil : Update 2001 platform removal seminar
    • Unocal : Decommissioning Cost allocation method
  • Talk Show – 2 : Cost mechanism post operation from practical point of view

Day 2

  • Presentations :
    • CNOOC : Decommissioning, an overview from legal perspective
    • BP : Strategic Cost structure & Estimation for decommissioning
    • CPI : Property transfer & relinquishment – a combined PSC contractor approach
    • BPMIGAS (Mr. Gde Pradnyana) : Offshore Platform Decommissioning Plan & Execution

Groups discussions : Group A : PSC’s Pre ’94 contract & Group B : PSC’s Post ’94 contract

Day 3

  • Presentations of Group A & Group B
  • Recommendations
  • Closed by Mr. Kuswo – Head of Exploitation BPMIGAS


  • In Indonesia there are 530 offshore platforms among which 460 are in operation and 70 are not in operation
  • Among the 530, 276 platforms (52%) > 20 years
  • Among the 70 not in operation, 54 are still complete, and 16 are partially removed
  • TI is listed to have 73 platforms (13.8 %) and all are operational. as comparation BP has 210 (39.6%), CNOOC 99 (18.7%) and UNOCAL 79 (14.9%)

Legal Overview

  • Government Regulation No. 17 year 1974 governs decommissioning
  • In Indonesia, pre 1994, PSC only provides simple and unclear wording for decommissioning, as follows : “Contractor shall be responsible for the preparation and the execution of the work program, which shall be implemented in a workmanlike manner and by appropriate scientific methods, and contractor shall take the necessary precaution for the protection of navigations and fishing and shall prevent extensive pollution of the seas and rivers. It is also understood that execution of the work program shall be exercised so as not to conflict with the obligations imposed on the government of Indonesia by International law”
  • Post 1994 PSC started setting out clauses on how to manage the execution and cost for decommissioning :
    • “ Contractor shall, after the contract expiration or termination, or relinquishment of part of the contract area, or abandonment of any field, remove all equipment and installation ………………………………”
    • “Contractor shall include in annual budget of operating cost, estimate of the anticipated abandonment and site restoration cost…………….”
    • “ Contractor shall include with requisite plan of development for each commercial discovery, an abandonment and site restoration………………………”

Issues in Pre 1994 PSC

(copied from presentation of Rudi Simamora of CNOOC) 1/2

  • Who should be responsible for undertaking the decommissioning and to bear the cost incured thereof ?
  • BPMIGAS views that decommissioning is the responsibility of contractor under petroleum operation scheme as set out in PSC.
  • Contractors view that decommissioning is the responsibility of BPMIGAS based on the followings :
    • BPMIGAS holds the title to the equipments purchased under work program
    • Definition of work program doesn’t include post operation activities i.e decommissioning
    • GR No. 17/1974 prescibes that Pertamina or company having working relationship with Pertamina, which is responsible for the management thereof, shall be responsible for decommissioning
  • GR No. 17/1974 brought no change in terms of managing decommissioning matters
  • The sacntity of contract as guaranteed by Law No. 22/2001

Issues in Pre 1994 PSC

(copied from presentation of Rudi Simamora of CNOOC) 2/3

  • Should the facilities to be removed totally or should it remain in place, wholly or totally, perhaps to serve another purpose
  • Geneve convention 1958 prescribes a rule of total removal
  • UNCLOS 1982 envisage partial removal
  • IMO removal standards, 1989 allows partial removal
  • The London Convention on Prevention of Marine Pollution by dumping of Wastes and Other Matter , 1972 allows partial removal
  • Indonesia has ratified the Geneva Convention 1958 and UNCLOS 1982
  • GR No. 17/1974 requires total removal

Concerns over the implementation of in Post 1994 PSC

(copied from presentation of Rudi Simamora of CNOOC) 3/3

  • Placement of the funding program due to the BPMIGAS status and budgeting mechanism
  • Managing the funding program in view of the accounting period of cost oil recovery
  • Review the alternative of treating removal costs (CAPEX ? OPEX ?)

Work Group A ( for PSC’s pre 1994 contract)

Legal aspect

  • Clarify the responsibility for decommissioning
  • The decision shall be clearly written in an applicable agreed legal product

Financial Aspect

  • PSC to perform Economics Assessment in a case by case basis to understand different scenario’s of decommissioning (Re-use, salvage value, and other use)
  • Clarify the cost for abandonment and site restoration

Technical Aspects

  • Finalize the draft procedure Offshore Facility Decommissioning (as the result of 2001 seminar on platform removal)
  • Develop procedure for Onshore Facility Decommissioning
  • Implement a case by case Technical Assessment for abandonment and restoration
  • Synchronise national & international regulations

Work Group B ( for PSC’s post 1994 contract)

Legal aspect

  • Review and have clear understanding of the contract terms

Financial Aspect

  • Propose to use Escrow Account, ……… (a small team will follow)

Decommissioning planning

  • Clarify the time frame for agreement process and technical implementation…….. (a small team will follow)

Note : From TI two people are involved in the small team, they are : Deden

Supriyatman (DC) and Dicky Darman (Legal JHO)