Indonesia’s Pertamina eyes expired oil blocks

By Muklis Ali

JAKARTA, April 1 (BestGrowthStock) – Indonesia may revise its oil
and gas law to give state oil firm Pertamina first right to
take over any blocks whose contracts are expiring, members of
parliament said on Thursday, a move likely to upset foreign
players.

Pertamina wants to expand its upstream activities to boost
oil and gas production, and has identified several oil and gas
fields that it wants to take over from foreign majors.

These include the Mahakam block, offshore of East
Kalimantan, which is currently operated by Total’s (TOTF.PA: )
Indonesian unit where the block contract is due to expire in
2017, and the Madura BD field in East Java, which is operated
by Husky Energy Inc (HSE.TO: ) and China’s CNOOC (0883.HK: ).

Pertamina’s president director Karen Agustiawan previously
said the company is still in discussions with Total over taking
a stake of between 15-25 percent in Mahakam.

Indonesia’s crude oil production, which was about 1.5
million barrels per day (bpd) in the 1990s, has almost halved
and the country has become a net importer of crude oil in
recent years. It produced 949,100 bpd of crude oil and
condensate in 2009, missing a target of 960,000 bpd that year.

Major global resources firms such as Chevron (CVX.N: ),
ConocoPhillips (COP.N: ) and Total operate in Indonesia, but the
country has struggled to attract fresh investment and to
develop new oil and gas fields, because of a combination of
bureaucracy, increasing resource nationalism, and corruption.

However, Pertamina and several local players lack the
financial resources to develop major projects.

Indonesia ratified the current oil and gas law in 2001 and
revoked Pertamina’s monopoly in the sector.

“The parliamentary commission has agreed to discuss a
revision of the oil and gas law this year,” Satya Yudha, a
member of parliament for the Golkar Party, told Reuters.

“We want Pertamina’s role in expired blocks to be clearly
stated in the revision of the oil and gas law. However, we did
not want Pertamina to monopolise the sector again,” Yudha said,
adding that the revision is also intended to attract investment
in the oil and gas sector, and boost production.

Ownership and control of energy and mineral resources in
Indonesia is politically sensitive, particularly when it
involves foreign companies. Golkar’s leader, tycoon Aburizal
Bakrie, has extensive interests in the energy sector.

An energy ministry official, who declined to be identified,
said previously that a target of producing 965,000 bpd of crude
and condensate this year would be very difficult to achieve
since output from older wells was falling about 10-15 percent
per year.

Indonesia has offered new exploration rights and has said
it will provide new incentives to oil and gas investors,
including more favourable tax treatment and a better production
split, in order to encourage exploration.

But industry insiders have said the incentives may not be
sufficient, particularly since many of the unexplored fields
are in remote locations and often in deep water, and so
expensive to develop.

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(Reporting by Muklis Ali; Editing by Sara Webb)

Indonesia’s Pertamina eyes expired oil blocks