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otal E&P Indonesie is looking at scaling down its spending on the Mahakam block this year in a response to the ongoing decline in the world oil prices.

The reduction of its budget will be in the range of 10 to 15 percent from its previous plan to spend US$2.4 billion, according to the firm'€™s vice president of finance, human resources, general services and corporate communications, Arividya Noviyanto.

'€œThis [reduction] is due to the declining oil prices. For the reduction of work plans and budgets, we are looking at programs that are not affecting our production and we are also renegotiating a number of contracts [with sub-contractors],'€ Arividya said on Tuesday.

He added that the reduction would slightly reduce the number of planned well drillings this year, from somewhat more than 100 wells to somewhat fewer.

Arividya added the renegotiations with sub-contractors were expected to reduce costs in the range of 15 to 20 percent.

Oil and gas companies are struggling to maintain their operations amid the current low oil prices, which were triggered by a rising global supply over the success of the US'€™ shale oil activities. The benchmark West Texas Intermediate (WTI) crude oil price for May delivery was at $56 per barrel on Tuesday, according to figures from Bloomberg. Meanwhile, the other benchmark price, for Brent crude oil, was at $62 per barrel.

Oil prices dropped almost 50 percent last year as the countries involved in the Organization of Petroleum Exporting Countries (OPEC) decided to continue pumping out around 30 million barrels per day as an attempt to maintain their market share amid a global glut of supply caused by US shale oil. US oil production grew to its highest level to date to 9.4 million barrels in March, according to Bloomberg, citing Energy Information Administration figures since 1983.

The Indonesian Petroleum Association (IPA) said earlier that oil and gas contractors in the country would have to cut their capital expenditures by around 20 percent in response to the decline in oil prices.

The country'€™s Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) said earlier that it was in discussions with oil and gas contractors in this country to review the companies'€™ working plans and budgets. The task force is encouraging the companies to hold negotiations with their respective sub-contractors to reduce costs while maintaining the number of their activities so that they can maintain their production levels.

Total is currently the operator of the country'€™s biggest gas producer, the Mahakam block, which is located in East Kalimantan.

Despite the budget reduction, Arividya said that the company would still be able to maintain its gas output target from the block at 1.7 billion cubic feet per day.

Meanwhile, the condensate output target will likely be lifted to 65,000 barrels per day, from an initial plan of 62,000 barrels per day.

The Mahakam block is currently under the spotlight, particularly over the government'€™s plan to hand over the operation of the block to state-owned oil and gas firm Pertamina following the looming expiry of Total'€™s control. Under the current production sharing contract (PSC), Total will be the operator of Mahakam until 2017.

The government has revealed that it wants Pertamina to be the new operator for Mahakam starting on Jan. 1, 2018. Related parties are currently working out the details of the possible transition period so that a change in operators will not affect Mahakam'€™s output. The current PSC mentions no details about any transition period, making lengthy discussions necessary any agreement can be reached.