Drilling and Well Intervention Contract Strategy during Operatorship Transition: Practicing in Mahakam Block, Sanga Sanga Block, and East Kalimantan-Attaka Block
Authors: Hendrazid Hendrazid , Kamil Efriza Mustafa , Jaya Rana , Suhardianto Moh Jeffri , Miera Pocut Nurul , Subhan Muhammad , Feizal Aulia Hamdani 
Published: October 2019

PT Pertamina Hulu Indonesia ("PHI") was founded in December 28th, 2015 as a subsidiary of PT Pertamina (Persero) ("Pertamina"). PHI was established as operation holding company to operate, manage, and conduct upstream activities in working areas, which were handed over to Pertamina by Government of Indonesia ("GoI"). The corporate objectives of PHI are to maintain production, to increase reserves, to conduct exploration activities and to assist/provide guidance in terms of HSSE policies of the working area.

Recently, PHI has three subsidiaries: PT Pertamina Hulu Mahakam ("PHM"), PT Pertamina Hulu Sanga Sanga ("PHSS"), and PT Pertamina Hulu East Kalimantan ("PHKT").

Each subsidiary requires many approaches to restrain high natural declined rate related to drilling, workover, and well services activities. Consequently, Pertamina as the new Operator had to immediately conduct such activities even prior to effective date of its operatorship. Pertamina has invested in PHI through its first subsidiary since 2017 through drilling 15 wells, 12 workover, and hundred of well services activities. In addition, 7 new Plan of Development(s) ("POD"s) have been agreed for 180 new drilling jobs in 2018 onwards to support production target. Meanwhile for other subsidiaries, Pertamina immediately conducted upstream activities consist of 2 new drilling jobs, 9 workover & 70 well services for its second subsidiary, and 10 workover & 59 well services for its third subsidiary, right after the blocks were handed over.

To ensure drilling and well intervention activities conducted properly, many material and services contracts must be prepared and available on time prior to program started, such as Drilling Rig Services, Drilling Fluid Services, Cementing Services, Electric Logging Services, Wellhead Services, Coiled Tubing Unit Services, et cetera. It has to be started from the beginning of and completed within the transition period.

However, throughout transition period, PHI was dealing with some concerns due to many parties involved, especially regarding information restriction and confidentiality included into legal issue. In addition, PHI had also limited time and drilling personnel resources to prepare the contracts required to execute drilling and well intervention program.

To encounter challenges above, the first thing to be prepared was Transfer Agreement ("TA"), and both parties (PHI and former Operator) to align rights and responsibilities of each party must sign it. PHI was succesfull in providing all required contracts for the continuation of transition and operation activities at PHI subsidiaries. Over the transition period, PHI already providing the procurement contracts directly related to drilling and well intervention activities, as follows: 158 contracts from former Operators and 60 new procurements for the new Operators.

This paper will describe the successful contract strategy implementation of three subsidiaries in PHI which proven to be an efficient example of working area transition period in term of contracts.