Through the contract termination, the government received a US$20 million signature bonus and an investment commitment of $308 million for four blocks over the next five years.

The four blocks are Bula Block, Seram-NonBula Block, Pendopo and Raja Block and Jambi Merang Block, with the latter two set to be under the management of Pertamina’s upstream unit Pertamina Hulu Energi (PHE). Bula and Seram-NonBula blocks are located in Maluku, while the latter two are in South Sumatra.

“The agreements are a 20-year contract with gross-split schemes […] The government hopes that the operators can retain and improve the blocks’ production in the years to come,” said Djoko Siswanto, the oil and gas director general at the Energy and Mineral Resources Ministry, on Friday.

Under the gross-split scheme, Jambi Merang Block as the biggest oil producer among its counterparts will set the profit share for the contractor and the government at 46.5 and 53.5 percent, respectively, in terms of oil
production.

As for gas production, the profit share will be at 51.5 and 48.5 percent for the contractor and the government, respectively.

Pertamina acting president director Nicke Widyawati said Pendopo and Raja Block and Jambi Merang Block would boost the company’s contribution to national oil and gas production to 40 percent by 2020 from the current 20 percent.

Meanwhile, the blocks’ contribution to Pertamina’s revenue is estimated to reach $24 billion in 20 years.

“We thanked the government for the assignment of the two blocks as previously we also secured eight oil and gas working contracts, all of which will increase our total production capacity in the years to come,” she said.

The eight blocks Nicke referred to are the North Sumatra Offshore, Ogan Komering, Southeast Sumatra, Tuban, East Kalimantan, Attaka, Tengah and Sanga-Sanga blocks.

As for Pertamina’s plan for the two new blocks, Nicke said there was an option to have a partner for a joint-operation but called for a thorough study on financial and technical issues to be carried out first.

“Although our doors are open to partnership, we must keep mitigating all the risks, for instance, in finances and technicalities,” she said. “We must calculate with accuracy.”

Amien Sunaryadi, the head of the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas), said the Jambi Merang Block, which Pertamina now fully owns along with the local government with shares of 10 percent, had two potential buyers for its gas reserve that had yet to be optimized.

“It [gas production] can be sold to independent power producers [IPPs] for electricity purposes and also for the operation of a plantation and a factory, both of which are located near the block,” he said.

The plantation firm, Amien said, had at least 1,000 trucks, which could operate with liquefied natural gas (LNG) as fuel.

Amien lauded the contract for the Jambi Merang Block, saying that besides the investment commitment and signature bonus, Pertamina was also set to disburse $214 million for exploration.

“The exploration can be done around the block’s area or beyond with a joint-study scheme, which must be approved by the government,” he said.

As of now, 22 oil and gas working contracts are scheduled to expire by 2026. Meanwhile, six blocks, namely South Jambi Block B, Kepala Burung Block A and the Brantas, Salawati, Malacca Strait and Makassar Strait blocks will expire next year.

When asked about the progress, Djoko said his party had pledged to speed up the implementation of the gross-split scheme for the 22 working contracts by the end of this year.

“We have set the schedule and the road map. The first step is the 2020 batch that we expect to finish this June, while the 2021 batch will be completed in July and so on until it reaches the 2025 batch at the end of this year,” he said.

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