Minister plans new policy to lure Total, Inpex to invest in Mahakam block

The Ministry of Energy and Mineral Resources is drafting a new decree that would allow state-owned oil and gas firm PT Pertamina to allocate up to 39 percent participating interest in Mahakam block to potential partners including the block?s current operator Total E&P Indonesie and partner Inpex Corp.

This was revealed on Thursday by Deputy Minister of Energy and Mineral Resources Arcandra Tahar. He said that the new decree would revise a previous 2015 decree issued by then minister of energy and mineral resources Sudirman Said, which stipulates that Pertamina is allowed to allocate only up to 30 percent interest to a partner or partners in developing the block.

He said that the revision of the 2015 decree is made following request by Pertamina to allow the company to offer greater shares in Mahakam block to potential partners. He added that Pertamina will still be the operator of the block.

The government decided in 2015 to transfer 100 percent of Mahakam block to Pertamina after the current contract of Total and Inpex expire at the end of this year. At the time, Pertamina was allowed to allocate up to 30 percent interest in the block under a new contract to Total and Inpex. The government wants Total to continue investment in the Mahakam block, located in East Kalimantan, amid doubt over Pertamina?s capacity in maintaining production level of the block.

Earlier this year, Minister of Energy and Mineral Resource Ignasius Jonan suggested for Pertamina to allocate 39 percent interest to Total to entice the French company to keep investing in the Mahakam block. Total later sent a letter to the ministry indicating its interest to continue investment in Mahakam block on certain conditions including getting a 39 percent participating interest in the block in the new contract.

Pertamina, however, has insisted that it was only willing to allocate up to 30 percent participating interest in line with the 2015 decree. It?s not clear why Pertamina has now changed its position. Pertamina could not be immediately reached for confirmation whether it has made the request to the ministry to be allowed to allocate up to 39 percent participating interest in Mahakam block to Total and Inpex. (*)