Total E&P Indonesie, a local unit of France-based oil and gas giant Total, says it will carry on its current investment plan in the Mahakam block in East Kalimantan despite uncertainties over the extension of the company’s contract over the block.
Total E&P’s department head of media relations, Kristanto Hartadi, said on Friday that as the block’s operator, the firm would continue to develop the gas-rich block until its production sharing contract (PSC) expired in 2017.
“We are still committed to our investment plan pending discussions over the new contract for the Mahakam block once the old one expires,” he told The Jakarta Post in a telephone interview.
The spokesperson was commenting on the ongoing debates on whether the government would extend the current concession for the block, jointly held by Total E&P and Japan’s Inpex Corp, or handing it over to state energy PT Pertamina once it expired.
Earlier, Deputy Energy and Mineral Resources Minister Rudi Rubiandini said one of the options currently being mulled over was to make both Pertamina and Total E&P the block’s operators in the first five years after 2017.
Pertamina, according to Rudi, would need the expertise of Total E&P in the beginning before becoming the sole operator of the Mahakam block.
Total E&P, according to Kristanto, was aware of the option and said it would discuss it further with related parties. He reaffirmed that the firm was still “interested” in developing the Mahakam block in the future, even if its role would be reduced.
The firm announced on Friday that it had started production from South Mahakam fields in the Mahakam block two months earlier than planned. The projects consist of the phased development of three gas condensate fields (Stupa, East Mandu and Jumelai) and two gas fields (Jempang and Metulang).
Production started last week with the gas produced from two wells drilled from Stupa and the level of production reaching 100 million cubic feet per day (mmscfd) on Sunday.
“Production is expected to ramp up to reach an average flow rate of 69,000 barrels oil equivalent per day [boepd] of gas including 18,000 barrels per day of condensates by the end of 2013,” he said.
The initial contract for the block, which covers a 3,339-square-kilometer area, was signed on March 31, 1967 and expired on March 31, 1997. The block consists of several fields including Tunu, Tambora, Peciko, Sisi and Nubi, and began production in 1974.
One year before Soeharto stepped down as president in 1998 amid public pressure, the contract was extended and would expire on March 31, 2017.
While the Mahakam block’s contract will be expired in 2017, the upstream oil and regulator BPMigas has said that, ideally, contract renewal should be settled five years prior to expiration date.
As of October this year, the oil output from the Mahakam block reached 67,478 barrels per day (bpd), surpassing BPMigas’s expectation of around 66,000 bpd, as specified in the Total E&P’s work plan and budget.
Meanwhile, gas production from the Mahakam block as of October has reached 1,915 million metric mmscfd or slightly below BPMigas’ expectation of 2,020 mmscfd, due to aging wells.
BPMigas spokesman Hadi Prasetyo said separately that the government should provide certainty as soon as possible to avoid repeating last year’s Kodeco case in West Madura offshore.
The government made a last minute decision regarding whether or not to give Kodeco an extension or hand the block over to Pertamina. This resulted in lower oil output by 5,500 bpd because according to BPMigas, the uncertainty made Kodeco hesitant to expand and put new investments.
Separately, Democratic Party lawmaker Sutan Bathoegana, who chaired the House of Representatives Commission VII overseeing energy affairs, said that lawmakers would summon the officials with the Energy and Mineral Resources Ministry later this month to urge the government to hand over the Mahakam oil and gas block in East Kalimantan to Pertamina once the block’s contract expires.
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