T

otal E&P Indonesia, a local subsidiary of the French giant Total Group, has asked the country'€™s oil and gas regulators for a lengthy transition period should its contract not be extended on the Mahakam block, as a sudden write-off of the company'€™s activities there would significantly decrease the production rate of the site.

According to the oil and gas firm'€™s president director, Hardy Pramono, the company is suggesting a five-year transition period to operate the block alongside its partner Inpex and state oil and gas firm PT Pertamina during the transition process.

'€œTotal would remain in charge of operations, but it won'€™t stand alone. The government is then free to choose who will operate it afterwards,'€ Hardy told reporters on Monday.

'€œWe'€™re just giving them a fair warning. It'€™s up to the government, but it'€™s best for the country that the decision be made swiftly.'€

Hardy said that the company would continue to fulfill its obligations to the government in operating Mahakam until 2017. The company needs enough justification to inject more investment into the project, he said.

Total had commenced discussions regarding the issue in 2007, 10 years before the Mahakam contract was to expire, with BP Migas acknowledging the company'€™s right to open talks at such an early stage.

'€œFossil fuel production will definitely fall. In order to maintain the production level at a reasonable rate, there are four activities we can do,'€ Hardy explained.

The company had commenced four strategies to keep production rates afloat, including drilling 100 new wells per year, conducting maintenance on existing wells, installing compressors for wells that have lost pressure and adding more platforms to the existing sites.

Previously, data from oil and gas regulator Upstream Oil and Gas Regulatory Task Force (SKKMigas) showed that Total was planning to produce 1,579 million standard cubic feet (mmscfd) in gas and 62,910 barrels of oil per day.

The company had planned to engage in several activities this year in order to maintain production, including drilling 100 wells, boosting production at existing wells and conducting seismic surveys. The company has allocated US$2.5 billion each year for such programs, Hardy continued.

The Mahakam block contract was signed in 1967 and in 1997 was extended for 20 years until 2017. Total and its Japanese partner, Inpex, are currently operating the block with 50 percent interest in it each.

Total is seeking certainty over further extensions of the contract, which will guarantee their massive investment in the block.

An oil and gas contractor is allowed to submit a proposal for a contract extension 10 years before it expires. However, the government has yet to decide whether it will grant an extension or terminate the contract. The recent termination of the Siak block contract that belonged to PT Chevron Pacific Indonesia, which was announced on the day it expired, has been criticized.

Pressure has mounted for the government to terminate the contract and grant the block to state-owned PT Pertamina for operation.