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The government may not extend Total E&P Indonesie's
contract to operate an oil and gas block in the Mahakam Strait and
neighboring coastal areas of East Kalimantan when it expires in 2017,
and may offer it instead to PT Pertamina, an official says.
Luluk Sumiarso, the Energy and Mineral Resources Ministry's director
general of oil and gas, said Thursday that, in line with proposed
amendments to the 2001 Oil and Gas Law, Pertamina, as a state-owned
firm, would have the first option to take over the block once it was
declared an open area after the current contract expired.
The proposed amendments, made necessary by the annulling of two
articles of the 2001 law by the Constitutional Court in 2004, require
the government to accord priority to domestic firms, including
state-owned enterprises, when it comes to granting contracts for open
areas.
However, Luluk said that if Pertamina lacked the financial resources to
take over the block, then it could turn to the private sector for a
partner, which could conceivably be the block's current operator, Total.
Total, which has operated the Mahakam block since 1970, has proposed
the extension of its second 20-year contract for the block, which still
has gas reserves of 13 trillion cubic feet.
"We are still engaged in negotiations and have submitted all the
necessary technical documents," said Total corporate communications
manager Ananda Idris.
He said that the company had set aside a major investment of US$6
billion for the next five years' of the block's operation, and $8
billion up until 2017.
Total operates the block in partnership with Japan's largest oil
company, Inpex.
The block extends to some 2,000 hectares in total, with seven oil and
gas fields and 535 production wells located in the Mahakam Strait and
contiguous areas of East Kalimantan. The block supplies about 66
percent of the gas required by the Bontang LNG plant.
Total's total gas production currently stands at about 2.6 million
standard cubic feet per day.
Under the production-sharing agreement, Total takes 30 percent of the
gas output and the state gets 70 percent. Total and Inpex each hold 50
percent shares in the block.
Sukusen Soemarinda, Pertamina corporate senior vice president for
upstream activities, has responded positively to the government's
proposal to give priority to state-owned companies in developing the
nation's oil and gas sector.
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