S

tate-owned oil and gas firm PT Pertamina confirmed its plan to acquire a 10 percent stake in the Masela block in the Arafura Sea, saying the transaction could be finalized when the government granted its approval.

Company spokesman Mochamad Harun said Pertamina sent a letter to the Energy and Mineral Resources Ministry in June about the plan.

He added that the company had budgeted to invest in the block but declined to disclose the precise amount.

“We’re now waiting for approval from the Energy and Mineral Resources Minister [Darwin Zahedy Saleh],” he told reporters in a telephone interview on Monday.

Pertamina had previously contacted the current block operator, Japan-based Inpex Corporation, about getting involved in operating the block, Harun said, adding that Inpex “welcomed” the plan and indicated no problems with it.

He expected that the transaction for the 10 percent stake could be completed this year.

Inpex announced on Friday that it had transferred its 30 percent stake in the Masela block to Shell Upstream Overseas Services, a subsidiary of the Anglo-Dutch Royal Dutch Shell, in a bid to find a capable offshore operations partner.

In December 2010, the government approved a plan to set up a floating liquefied natural gas (FLNG) plant with an annual production capacity of 2.5 million tons for the first developmental phase at the blocks’ Abadi gas field.

The statement, available on Inpex’ official website, says the transaction is subject to the Indonesian government’s approval.

If the plan is approved, the ownership composition of the Masela block will be Inpex with 60 percent, Shell with 30 percent and Energi Mega Persada with 10 percent.

However, both the ministry and upstream oil and gas regulator BPMigas said that no report had been submitted by Inpex on the matter as of Monday.

The ministry’s Oil and Gas Director General, Evita Herawati Legowo, said that a change in the ownership of an oil and gas block was strictly a business-to-business decision.

“If participating interest [shareholders] want to change the structure of the ownership of a block, please go ahead. They just need to submit a report to the government,” she told reporters after the Indonesia Energy Week 2011 opening ceremony.

Regarding regional administration-owned enterprises’ opportunities for involvement in operating the Masela block, she said that interested firms needed sufficient capital and technological capabilities to develop the block.

The 2004 government regulation on upstream oil and gas activities stipulates that production sharing contract (PSC) holders at an oil and gas block are obliged to offer 10 percent of participating interest to regional enterprises.

BPMigas deputy chairman Hardiono agreed with Evita that the central government needed to educate local administrations that participating interests in an oil and gas block did not come without a price.