Minister prepares decree on Mahakam block share down

By Bonha Ventura Sebayang

Minister of Energy and Mineral Resources Ignasius Jonan is currently drafting a new decree that would provide authority for state-owned oil and gas firm PT Pertamina to transfer up to 39 percent participating interest (share down) in Mahakam block after 2017.

Deputy Minister of Energy and Mineral Resources Arcandra Tahar said that the decree is expected to be completed soon. He did not provide further details.

Expert Staff to the minister Hadi M. Djuraid, however, was quoted as saying that the decision regarding the transfer of Mahakam block shares to current operator Total after its contract expires at the end of this year will be solely made by Pertamina, based on business-to-business negotiations between the two firms.

The government has decided it will transfer the Mahakam block, in East Kalimantan, to Pertamina when the current contract of Total and partner Inpex Corp expires at the end of this year. The previous minister decided to allow Total and Inpex to have up to 30 percent participating interest in a new contract with Pertamina as the new operator after 2017. But Jonan suggested a few months ago to allow Total to have up to 39 percent interest in the Mahakam block to encourage the current operator to continue participation in the development of the block so as to help avoid production from declining. By allocating up to 39 percent interest to Total, Pertamina will still retain majority although it would also have to allocate another 10 percent participating interest for the local governments.

But Pertamina President Director Elia Masa Manik said to Petromindo.com recently that there has been no talks with Total over the planned Mahakam block share down. ?There has been no discussion yet. Total have just submitted three conditions to government via MEMR (for its continued participation in Mahakam block development), two of which are related to fiscal policies of which the decision lies in the hands of the government,? he told Petromindo.com, referring to the Ministry of Energy and Mineral Resources.

The three conditions demanded by Total include investment credit of 17 percent, accelerated depreciation to only two years, and price of oil and gas allocated for the domestic market (DMO obligation) to be the same as the price in the international market.

He said that regarding the minister?s plan to give authority to Pertamina in decision share down of up to 39 percent, the company will first evaluate it.

Editing by Reiner Simanjuntak