Govt to increase state production split in Mahakam block
Saturday, June 20 2015 - 02:54 AM WIB
Ministry of Energy and Mineral Resources plans to increase its net production share, also known the as equity to be split (ETS), in the Mahakam block in East Kalimantan in order to optimize state revenues from oil and gas activities in the block in the post-2017 period.
Under the Production Sharing Contract (PSC) system, ETS is the amount of lifting/production which is to be split between contractors and the state after deduction of First Tranche Petroleum (FTP), investment credit and cost recovery.
Director General of Oil and Gas at the ministry IGN Wiratmaja said that his office is evaluating the reserves of Mahakam block and the evaluation result will become a reference to calculate the production split.
"We want better state revenue, even if possible, a higher production share," he said.
The production split of Mahakam in the current contract remains unknown to the public. However, under the traditional PSC system, the government takes 70 percent of gas production, leaving the remaining 30 percent to the contractors. The government take 85 percent of oil and condensate production, leaving the remaining 15 percent to the contractors.
In the future, said Wiratmaja, the government wants the state portion can be increased. So this is same with split for the production of oil and condensate produced from the Mahakam block, he added.
The current PSC on Mahakam expires on Dec. 31, 2017. The government expects to sign a new PSC on the block prior to the contract?s expiry with new contractors. The government has decided to give 70 percent of the block?s interest to state owned oil and gas firm PT Pertamina along with a company owned by the East Kalimantan provincial government.
Aside from the ETS, the government is also studying the amount of FTP in the new contract. The FTP currently stands 20 percent. "The FTP is still following the existing regulations. But everything is possible if we want to improve the state?s revenue," he said.
In response to Wiratmaja?s statement, Upstream Director of Pertamina Syamsu Alam said Pertamina would accept any decisions by the government regarding the production?s split and FTP.
Editing by Johannes Simbolon