Collaboration between Total, Pertamina in Mahakam Block seen as best solution
Wednesday, February 13 2013 - 01:52 AM WIB
State-owned oil and gas firm PT Pertamina and a provincial administration-owned company should team up with Total/Inpex in managing the gas-rich Mahakam Block in East Kalimantan once the contract of the current operator (Total/Inpex) expires in 2017.
?Collaboration between the existing investor and state-owned/regional administration owned companies is the best solution,? Chairman of SKK Migas, the upstream oil and gas authority, Rudi Rubiandini told Petromindo.com Wednesday.
He said that the two local companies could learn from Total and Inpex in managing huge asset as the Mahakam Block, which to date remains a backbone of the country?s gas production.
Rudi?s statement comes amid lingering debate on who should stake over the operatorship of the Mahakam Block after the existing contract expires in 2017. The current operators Total and Inpex have said they wanted the contract to be extended, while Pertamina as a national company wants to take over the block. The East Kalimantan provincial administration has also demanded for a participating interest in the block.
Rudi said that there are a number of reasons why Total/Inpex wants the existing contract must be extended.
The two firms plan to make huge investment between 2013 and 2017 in a bid to further increase gas production in the block, and to meet commitment to gas buyers until 2022. The investment will only make economic and business sense if Total and Inpex remain as operator of the block until 2022.
Second, there?s commitment of gas sales that must be fulfilled in 2018-2022, which would be comfortable for Total and Inpex if they stay in the block after 2017.
Rudi said that if the government decides not to include Total and Inpex after 2017, it?s for certain that significant investment requirement for the block would be stopped, and gas production will drop drastically, thus causing gas sales commitment to be unfulfilled.
?Therefore Total/Inpex suggested they remain as operator after 2017, and from 2022 to be handed over to other parties to operate the block,? Rudi said.
Rudi also said that under the new contract to be made after 2017, the government could demand for greater revenue share both from gas and oil produced by the block because the existing equipment and facilities becomes government ownership (fully paid through the cost recovery mechanism) and thus could be treated as equity in the block. ?So the revenue share of the operator will not be as large as it is now,? Rudi said, adding that the aforementioned technical considerations would be included by Minister of Energy and Mineral Resources in making decision who should take over the operatorship of the Mahakam Block after 2017.
Editing by Reiner Simanjuntak