Govt demands increased DMO for Mahakam contract extension

Government will slap 46 percent domestic market obligation (DMO) on the giant Mahakam gas block as one of the conditions to extend the block?s contract, which will expire in 2017, a BPMIGAS senior official said on Monday.

BPMIGAS Chairman R. Priyono told reporters that the DMO requirement would be raised from 25 percent currently to ensure availability of gas to domestic market.

Mahakam block is operated by French oil, gas giant Total SA in partnership with Japanese firm Inpex Corp, which holds 50 percent interest.

The partnership had just signed HoA to extend LNG 25 million tonnes LNG supply contract with a group of Japanese buyers known as Western Buyers.

Mahakam partnership has also signed a Memorandum of Agreement with a consortium of local buyers which consisted of state electricity firm PLN, gas distribution firm PGN and state oil and gas firm Pertamina to supply 1.5MTPA of LNG starting 2011.

Priyono did not give detail about other conditions that would be set for contract extension, but Minister of Energy and Mineral Resources Purnomo Yusgiantoro had said earlier that government would also reduce the contractor?s split and may give a certain percentage of interest in the block to Pertamina.

Total is trying to get 15 years of contract extension for the Mahakam Block, currently Indonesia?s top gas field with production of 2.6BCFD. (godang)