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Govt entrusts Pertamina with Natuna block
The government has given Pertamina the rights to develop the Natuna gas block in Riau islands province following a deadlock in a negotiation with ExxonMobil Corp
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The government has given Pertamina the rights to develop the Natuna gas block in Riau islands province following a deadlock in a negotiation with ExxonMobil Corp. over a contract extension, an executive says.
Pertamina upstream director Karen Agustiawan said during a Monday meeting with the House of Representatives that the Energy and Mineral Resources Ministry had issued a letter assigning Pertamina to develop the block and to carry out a feasibility study on the site's development.
"Pertamina is currently arranging the study and terms of reference for choosing a partner, an issue which will also be discussed with the ministry," Karen said.
She also said Pertamina had begun a negotiation on the new contract's terms and conditions with the directorate general of oil and gas.
Pertamina finance director Frederick Siahaan said based on the company's early assessment of the project, the company would need US$52 billion in investment to develop the block, which has reserves contaminated by high levels of carbon dioxide, making processing more difficult.
However, according to a presentation made by president director Ari Soemarno, the company has prioritized the project.
The company will seek funds to support the project from third parties, Frederick said without elaborating.
Four foreign oil and gas companies have so far conveyed their interest in a formal letter sent to Pertamina, Pertamina vice president Iin Arifin Takhyan said, including Royal Dutch oil giant Shell, Malaysia's Petronas, Petrovietnam and Norway's Statoil.
The decision comes after the government in February instructed Pertamina to prepare to take over the development of the gas-rich Natuna block from ExxonMobil Corp., following a deadlock in a negotiation over the U.S. energy giant's contract extension.
The government claims Exxon's rights expired in 2005 after it failed to show any progress in developing the field. Exxon has denied the claim, saying it retained its rights to the block after sinking $400 million into its exploration.
Previously, Exxon held a 74 percent participating interest in the block, while Pertamina owned the remaining 26 percent.
The block is estimated to hold 46 trillion cubic feet of gas, making it one of the biggest gas reserves in Asia.
