Mahakam Contract Area is located in East Kalimantan Province, Indonesia. It covers an operating area of 3,266 km2, and consists of 7 producing fields. Most of Mahakam hydrocarbon accumulations are located below body of water, with wellhead production facilities installed in the estuary of Mahakam river (referred as swamp area, 0 to 5m water depth) and the western part of Makassar Strait (referred as offshore area, 30 to 70 m water depth). Mahakam production history goes as far back as mid 1970s with production of Handil and Bekapai oil fields. Gas production started by the decade of 1990s along with emergence of LNG trading, supplying Bontang LNG plant, through production of 2 giant gas fields: Tunu and Peciko, and smaller Tambora field. In the mid 2000s, Mahakam attained its peak gas production in the level of 2,600 MMscfd and was Indonesia's biggest gas producer. Two remaining gas discoveries, Sisi Nubi and South Mahakam, were put in production respectively in 2007 and 2012. Due to absence of new discoveries and new fields brought into production, Mahakam production has entered decline phase since 2010, and by end of 2020, after 46 years of production, the production is in the level of 600 MMscfd. In 2018, along with the expiration of Mahakam production sharing contract, Pertamina Hulu Mahakam (PHM), a subsidiary of Indonesian national energy company, Pertamina, was awarded operatorship of Mahakam Block. This paper describes the efforts undertaken by PHM to fight production decline and rejuvenate development portfolio, with focus on expanding subsurface development portfolio and reserves renewal by optimizing development concept and cost through fit-for-purpose design, innovation, and full cycle value engineering.

First developed in 1990, intensive studies that were conducted after 10 years of production of the Tunu field showed that due to its heterogeneity, the lateral connectivity of the Tunu reservoirs was not sufficiently addressed by the initial drilling pattern. The next phases of Tunu development plan would then involve the drilling of infill wells with reduced spacing. By 2005 the operator estimated that 800 new wells would need to be drilled, at a rate of 60 wells per year, in order to maintain the field potential and achieve the targeted recovery factor. In addition, with low incremental reserves per well, the main challenge that the operator faced, was to reduce the cost of drilling infill wells, to preserve the economics of the development projects. The stakes for cost reduction were very high, as the Tunu field represented half of Mahakam PSC's remaining gas reserves and was expected to remain its biggest producer for years to come. This paper illustrates the different design and operational optimization efforts that have been undertaken since 2005 in the framework of cost reduction exercises involving different disciplines: drilling, completion, surface facilities, and development project. Analysis performed in 2008 showed that, at constant market conditions, the successful optimization process on 2 projects sanctioned in 2006/2007 contributed to around 300 MUSD of savings, whilst long term potential cost savings are estimated to be more than 2 BUSD of the 8 BUSD initial capex estimate.

Mahakam Block has been in operation for nearly half a century with cumulative production of approximately 20 trillion cubic feet of gas and 1.5 billion barrels of oil. Mature field challenges have become more evident as portrayed by declining production, more complex surface constraints, more challenging profitability of new projects and decreasing resources of new wells, which are also exacerbated by external factors such as volatility of oil and gas prices. Despite the aforementioned challenges and complexity in terms of operating numerous fields with different characteristics, Mahakam is currently still one of the biggest producing blocks in Indonesia. The success of sustaining production and prolonging the life of Mahakam is the result of continuous innovations, improvements and optimizations on various aspects over the years. Subsurface innovative ideas by restudying and redefining geological concepts has led Pertamina Hulu Mahakam (PHM) to drill step-out wells in Handil, Tunu, South Mahakam and Sisi Nubi fields that deliver positive results and open new opportunities. In the non-subsurface aspect, Indonesia's first Plan of Development that combines higher and lower value projects across fields called OPLL (Optimasi Pengembangan Lapangan-Lapangan) was initiated in order to develop fields with marginal value and to achieve economy of scale. Moreover, Capital Expenditure (CAPEX) optimization through evolution of platform design, well architecture and sand control method is crucial for exploitation of targets with lower resources over time. PHM has also launched CLEOPATRA (Cost Effectiveness and Lean Operations in Mature Asset), later renamed to LOCOMOTIVE-8 (Low Operations Cost of Mahakam to Achieve Effectiveness and Efficiencies), to achieve Operating Expenditure (OPEX) efficiency through various initiatives driven by each entity. Due to cost of money, budget accuracy is as important as expenditures reduction meaning that more detailed and deterministic budget estimation is necessary. In addition to optimizing cost structure, PHM strives to carry out gas commercialization efforts to improve revenue streams. In this rapidly changing era, especially for Mahakam, paradigm shift becomes highly critical. Changes in the structure and size of organization is essential to adjust with business dynamics. Adaptive organization structure is performed through digitalization and competency improvement to reduce repetitive tasks and increase productivity per capita. Cooperation between neighboring companies brings mutual benefit by sharing rig, transportation means, and pipeline network systems. Mutual benefit opportunity is also available between the company and Indonesian government by amendment of fiscal terms with the aim to enable the execution of sub-economic projects. Ultimately, one effort alone may be insignificant, but the combination of all of the efforts will be the key to the continuation of Mahakam story.