A. Profile of Bula’s Working Area
It is located in the mainland administrative area of the East Seram Regency (Kab. SBT) on Seram Island with a coverage area of approximately 35 square kilometers. The current oil and gas production of the Seram Bula WK comes from the Bula Field which is spread around Bula City, the capital of the Eastern Seram Regency on Seram Island, which is approximately 300 kilometers east of Ambon City. Seram Bula Working Area has 4 oil fields, namely Bula Lemun, Southeast Bula, Bula Air, and Kampung Denser.
The history of exploration activities in the Bula Basin has been carried out for a long time until Royal Dutch Shell discovered oil in Bula in 1895. The Bula well then produced more than 8 million barrels from 1913 until Seram Island was evacuated by Japan in 1944.
The PSC (Seram PSC) contract was first signed on November 1, 1969 by Pertamina together with Gulf & Western to start oil activities in Bula within a period of 30 years. Then the new Seram Bula Working Area Cooperation Contract was re-signed by Kalrez Petroleum (Seram) Ltd which acted as the sole Operator in 1999 until November 2019, which was then continued with the extension of the Cooperation Contract for up to 20 years. Broadly speaking, the historical timeline of the Bula Working Area Operator is depicted in Figure 2 below:
Kalrez Petroleum (Seram) Ltd (“Kalrez”) signed a contract extension as the Contractor of the Seram Bula CA for a period of 20 years with a Gross Split scheme starting from the effective date of November 1, 2019 until October 30, 2039.
Until now, Bula Oil and Gas WK has 60 production wells and 277 wells with shut-in status with a maximum depth of 600 meters. WK Migas Bula produces hydrocarbons with an API grade value of 22.9. The reservoir of WK Migas Bula is located in the Pliocene – Pleistocene Fufa and Pre-Fufa Formation. Oil production at the Bula Oil and Gas WK as of November 2021 is around 212 bopd (data source: Directorate General of Oil and Gas).
B. PI Switch Status 10%
Based on the provisions of the Minister of Energy and Mineral Resources No. 37 Article 7, MEA cannot manage Working Area Oil and Gas directly, but must go through PPD Migas or Subsidiaries.
The mechanism for the formation of subsidiaries has been regulated in Law Number 23 of 2014 concerning Regional Government Article 341 paragraph 2 which is based on an investment feasibility analysis by a professional and independent investment analyst.
Based on the above provisions, MEA has appointed JMT Lawhouse to accompany the transfer of the 10% PI as well as provide recommendations on the investment feasibility analysis of Working Area Bula which will be the basis for the establishment of a subsidiary (PPD Migas) which will manage the 10% PI.
Currently, the 10% PI Transfer process for the Bula WK which is managed by Kalrez is in stage 9, namely the follow-up to the 10% PI Transfer process in accordance with the PSC (Production Sharing Contract) provisions.
Stage 9 : K3S and BUMD Follow Up the Transfer of 10% PI in accordance with PSC Provisions
At this stage, MEA and Kalrez followed up with the 10% PI Transfer Process in accordance with the Cooperation Contract. The result of this 9th stage is the 10% PI Transfer Agreement of the Bula Working Area.
The 9th phase is expected to be completed in the 2nd week of March 2022. Therefore, Kalrez plans to delegate all matters related to the Transfer Process of the 10% PI Bula WK to the company attorney who is currently in the process of being appointed. In this case, MEA already has a companion consultant who helps in the Transfer Process of the 10% PI Bula WK, namely JMT Lawhouse.
Stage 8 : BUMD Submits Letter of Interest and Ability for 10% PI to K3S
At this stage, MEA submitted a Letter of Forwarding Interest and Ability PI 10% WK Bula to Kalrez with a copy to the Director General of Oil and Gas, Head of SKK Migas, and the Governor on January 13, 2022 to the Kalrez Office in Kuningan, Jakarta. This 8th stage takes place with a maximum period of 180 days after the completion of the Due Diligence process previously carried out by MEA against Kalrez.
Stage 7 : Due Diligence
Currently, the development of the 10% PI Transfer of Bula Working Area under the auspices of Kalrez Petroleum (Kalrez) is in stage 7, namely Due Diligence. Due Diligence is a complex inspection or verification mechanism against a legal subject and activities carried out from a legal point of view objectively and systematically based on agreement criteria and applicable laws and regulations.
The Due Diligence aims to obtain an overview or information regarding Kalrez in the management of the Bula Working Area, which is not limited to licensing and legal aspects; financial aspect; technical aspects; operational aspects; production aspects; environmental aspects; employment aspects; risk and other aspects.
This Due Diligence stage begins on October 14, 2021. Due Diligence is carried out within 180 days.
The WK Bula Due Diligence Implementation Team consists of:
a. MEA BUMD internal team;
b. Maluku High Prosecutor’s Office;
c. Maluku Province BPKP Representative; and
d. JMT Lawhouse as Assistant Consultant
The scope of Due Diligence includes:
● Preparation of reports/ legal opinions;
● Due Diligence Assistance;
● Risk assessment and governance assurance;
● Negotiation assistance with K3S, BUMD/ Regency Government, and other parties related to the 10% PI Transfer process; and
● Finalize agreements with K3S, BUMD/ Regency Government, and other parties related to the process.
The 10% PI Transfer Team from MEA is currently collecting the data needed for the Due Diligence stage. Such data can be provided with the approval and supervision of the Directorate General of Oil and Gas.
There are two types of data sources used in the preparation of this Due Diligence Report, namely primary and secondary.
Primary Data is data or information obtained directly from Kalrez when carrying out the Open Data Room, while Secondary Data is information data obtained from outside Kalrez which is used as additional information and comparison information.
Secondary Data is obtained from:
● Ministry of Energy and Mineral Resources;
● Directorate General of Oil and Gas;
● SKK Migas;
● Tax Office;
● Internet; and/or
● World Professional Research/Analyst Institute, namely Wood Mackenzie.
In the process of Due Diligence Bula Working Area, the data room is at the Kalrez office located in Kuningan, Jakarta.
After the data is collected, the 10% PI team and the consultant team will make a Due Diligence Report which will later be used as a consideration for the Parties (MEA and SBT Regency Government) in deciding the participation of 10% PI Management (stage 8).
Stage 6: Submission of Statement of Interest & Ability by BUMD to K3S
At this stage, MEA conveys interest and ability to Kalrez in writing with a copy to the Director General of Oil and Gas, Head of SKK Migas, and the Governor on March 30, 2021. This 6th stage takes place with a maximum period of 60 days from the receipt of the PI offer letter. 10% delivered by Kalrez.
Stage 5: Submission of Written Offer by K3S to BUMD through official letter
At this stage, Kalrez submits a written offer to MEA through an official letter with copies to the Director General of Oil and Gas, the Head of SKK Migas, and the Governor on March 30, 2021. Submission of this offer is carried out within a maximum period of 60 days from the receipt of the letter from the Head of SKK Migas to Kalrez.
Stage 4: Submission of the Appointment of BUMD by the Head of SKK Migas to K3S Regarding the Appointment of BUMD
At this stage, the Head of SKK Migas submitted a letter to Kalrez as the K3S Operator on January 27, 2021 to be able to offer 10% PI to BUMD appointed by the Governor of Maluku. The submission of this letter is carried out within 10 working days from the receipt of the Letter of Appointment of BUMD MEA by the Governor of Maluku to the Head of SKK Migas.
Stage 3: Submission of Letter of Appointment of BUMD by the Governor to SKK Migas
At this stage the Governor of Maluku is given 1 year from the receipt of the 10% PI Offer Letter from the Head of SKK Migas to prepare BUMD. The Governor of Maluku responded to the offer letter from the Head of SKK Migas by submitting a letter of Appointment of MEA as a 10% PI Recipient to the Head of SKK Migas on November 24, 2020.
Stage 2: Offer of 10% Participating Interest in Bula Oil and Gas WK by SKK Migas to the Governor
At this stage, the Governor of Maluku received an offer letter from the Head of SKK Migas regarding the 10% PI offer at the Bula Oil and Gas Working Area on December 5, 2019.
Stage 1: Approval of K3S Contract Extension
This stage is the beginning of a series of 10% Participating Interest Offers and Transfers to selected BUMDs carried out by K3S in the Oil and Gas Working Area. The 10% PI offer must be made by K3S to BUMD. This is stated in the Regulation of the Minister of Energy and Mineral Resources Number 37 of 2016 concerning Provisions for Participating Offers