Government Regulation (PP) No. 6/2018 on additional state capital injections to Pertamina issued on Feb. 28 will serve as the legal basis for the government’s plan to transfer its 57 percent stake in gas distributor Perusahaan Gas Negara (PGN) to the oil and gas giant.

Pertamina human resources director Nicke Widyawati said the value of the transferred shares would be stipulated in the upcoming finance ministerial decree (KMK) expected to be issued on March 16.

“After the KMK’s issuance, we will hold an extraordinary general shareholders meeting on the following Monday [March 19], when PGN will formally come under Pertamina’s management,” Nicke said on Monday.

Nicke said PGN’s operations would be integrated with Pertamina’s gas subsidiary PT Pertamina Gas (Pertagas), a move that would pave the way for the former to become a state subholding firm overseeing midstream to downstream gas business.

“We are still reviewing the detailed integration plan. But, for now, we are focusing on integrating their operations, whether in terms of their commercial businesses or investment plans,” she said, adding that this restructuring would allow PGN and Pertagas to operate more efficiently as there would be no more overlapping gas infrastructure between them.

As of last year, PGN operated gas transmission and distribution pipelines spanning 7,450 kilometers, or about 80 percent of Indonesia’s overall downstream gas pipelines. Meanwhile, Pertagas operated 2,085 km of transmission pipelines.

PGN’s consolidation with Pertagas will increase its total assets by 27.5 percent to US$8.7 billion, according to the two firm’s 2016 financial reports.

Fajar Harry Sampurno, the State-Owned Enterprise Ministry’s undersecretary for mining, strategic industries and media affairs, concurred with Nicke as Pertamina could only hold an extraordinary general shareholders meeting once the decree had been issued.

However, he said Pertamina’s transformation into an oil and gas holding firm must be completed this month.

Aside from the holding plan, the Energy and Mineral Resources Ministry has mandated Pertamina to take over eight upstream oil and gas blocks, all of which will see their contracts with existing operators expire this year.

The ministry has officially granted four blocks to Pertamina, namely the North Sumatra Offshore, Tengah, East Kalimantan and Attaka. It is still reviewing Pertamina’s work program and budget proposals for the remaining four blocks, namely the Tuban, Ogan Komering, Sanga-sanga and Offshore Southeast Sumatra.

“The new contracts [for the eight blocks] must be signed by March 19 at the latest,” Energy and Mineral Resources Minister Ignasius Jonan said recently.

As of 2016, total production from those eight blocks reached 47,245 barrels of oil per day (bopd) and 452 million standard cubic feet per day (mmscfd) of gas.

However, as Pertamina already has participating interests and production splits in some of those blocks, it may only achieve total additional production of around 43,812 bopd and 375.9 mmscfd after the takeover.

As of September 2017, Pertamina and PGN booked combined oil and gas productions totaling 380,800 bopd and 2,031 mmscfd, respectively.

It must be noted that the output figures had yet to take into account production from East Kalimantan’s Mahakam Block, which was acquired by Pertamina at the beginning of this year from France’s Total E&P Indonesie and Japan’s Inpex.

Mahakam’s ready-to-sell production, locally known as lifting, averaged 31,053 bopd and 969 mmscfd of gas in January.

Indonesia’s oil and gas lifting stood at 803,847 bopd and 6,386 mmscfd, respectively, last year.

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