Pertamina seeking to enter Mahakam soon

State oil and gas company Pertamina says it expects government approval of its plan to take over up to 25 percent participating interest in the Mahakam gas block in East Kalimantan in the first half of the year.

“We have submitted two options to the government and expect the decision to be made by April,” Pertamina president director Karen Agustiawan said Thursday.

“We want to get into the block as soon as possible, preferably within the first half of this year.”
She added Pertamina would not seek partners to enter the block.

The Mahakam block has estimated gas reserves of 11 trillion cubic feet. France’s Total S.A. operates the block with a 50 percent share, in partnership with Japan’s Inpex, which controls the other 50 percent.

The block’s concession expires at the end of 2017 and a government regulation on the upstream oil and gas sector stipulates Pertamina has the first right of refusal for any expired oil and gas contracts.
Karen declined to elaborate on the two options submitted to the government, saying only that the block’s proposed new operator was one of issues discussed in each option.

“Once the government has decided which option to use for the acquisition, we and Total can hold further business-to-business discussions of the matter,” she said.

The government has backed Pertamina in the acquisition plan.

“We want Pertamina to acquire part of the block’s stake before the contract expires in 2017,” Energy and Mineral Resources Minister Darwin Zahedy Saleh said last week.
Karen said Total had initially been reluctant to negotiate with Pertamina, but had since become more open to negotiations.

The Mahakam block currently supplies 80 percent of the gas for the Bontang liquefaction plant, operated by PT Badak NGL.
The liquefied natural gas from the plant is exported to Taiwan, Korea and Japan.
Karen said she believed a change in operator of the block would not affect the plant’s market.
In a parliamentary hearing last September, Total E&P Indonesia president director Elisabeth Proust said gas production from the block had experienced a natural decline.

Gas production is estimated to have dropped from 2.57 billion standard cubic feet a day (bcf/d) in 2008 to 2.55 bcf/d in 2009.
Production is predicted to further decline to 2.38 bcf/d in 2010.