S

tate-owned oil and gas company Pertamina will be able to own up to 15 percent of oil and gas blocks in cases where the contracts are extended to existing operators, according to a new government regulation.

The new regulation says that if a production sharing contract (PSC) in an oil and gas block is extended, Pertamina has the right to own a maximum 15 percent interest in it.

The regulation will support Pertamina'€™s efforts to increase its share of national oil production within the next five years by taking over the operation of expiring oil and gas blocks.

As a state-owned national oil firm, Pertamina must compete with other oil and gas firms '€” mostly international firms '€” to manage domestic fields. Pertamina is the operator of numerous oil and gas blocks in the country. However, its contribution to the national oil and gas output is around 23 percent, lower compared to other oil and gas firms in their respective countries.

Pertamina president director Dwi Soetjipto said earlier that his company had targeted to boost its shares in national oil production to 50 percent.

'€œOne of our focuses is to develop the upstream sector because we are currently only contributing around 23 percent to national production. National oil companies in other countries have bigger contributions,'€ Dwi said.

In the first quarter of the year, Pertamina reported that its oil production reached 267,480 barrels of oil per day (bopd) and gas production was at 1.622 million standard cubic feet per day (mmscfd).

This year, the government is targeting to see national average daily oil production at 825,000 bopd and gas output at 1.221 mmscfd.

Under the regulation, the government also set a deadline for Pertamina to submit a proposal to take over the operation of expiring blocks from existing operators. In cases where existing operators propose an extension within more than three years prior to contract expiry, Pertamina must submit a proposal of operatorship at least one year after the existing operator submits its extension proposal.

Meanwhile, in cases where existing operators submit an extension proposal in less than three years before contract expiry, Pertamina must submit a proposal of operatorship at least six months after the existing operator submits its extension proposal.

The government recently named Pertamina as the future operator of the Mahakam gas block after it rejected a proposal from French oil giant Total, the existing operator, to extend the contract that will end in 2017.

According to data from the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas), 32 oil and gas blocks are scheduled to expire between now and 2024.

The blocks'€™ combined production will reach 72.5 percent of the country'€™s current oil and gas output. Due to the size of production, concerns have increased over the fate of the expiring blocks.

The previous government often created uncertainty in the oil and gas industry because it only made decisions on the day that contracts expired. Under the new regulation, the government has to give a decision at least one year before the contract expires.