Pertamina allocates $700m investment for Mahakam next year

State-owned oil and gas firm PT Pertamina reiterated its commitment to maintain production at the Mahakam block, East Kalimantan, when its indirect subsidiary PT Pertamina Hulu Mahakam (PHM), starts taking over the operatorship of the block early next year after the contract of current operator PT Total E&P Indonesie (TEPI) expires at the end of this year.

Pertamina said in a statement obtained Friday that PHM will allocate US$700 million of investment next year for Mahakam block to finance various programs including development drilling and well workover to help achieve oil production target of 48,000 barrels per day, and gas production of 1,100 mmscfd.

Bambang Manumayoso, President Director of PT Pertamina Hulu Indonesia, the parent of PHM, said in the statement that to help achieve the production target, the company plans 57 development wells, and 132 workover wells.

The current contract of TEPI and partner Inpex Corp over Mahakam block is set to expire at the end of this year. The government has decided to transfer the block to Pertamina. But there have been concerns over Pertamina?s capacity in maintaining production of the block, prompting the government to advise Pertamina to continue to engage TEPI by among others agreeing to allocate up to 39 percent of participating interest in the block to the former operator. But Pertamina has insisted it is only willing to give 30 percent interest.

Bambang said that he is confident that Pertamina will be able to maintain production at the Mahakam block. He pointed out on Pertamina?s success in increasing production at ONWJ block, West Java Province, by 12 percent within five years after it took over the block from previous operator in 2009, and increasing production at West Madura Offshore block by 14 percent within four years after it took over the block from Kodeco in 2011.

He added that more than 98 percent of TEPI?s 1,919 workers have now been recruited by PHM.

Oil production at Mahakam block currently stands at 40.77 mbopd , while gas at 1,282 mmscfd. Cumulative oil production until end 2017 is estimated at 1.124 billion barrels, gas 19.17 bscfg, and condensate 499 million barrels. Total oil reserves is estimated at around 57 mmbo, and gas 4.9 tscf, with upside potential of 756.95 bscfd for gas and 12.7 mmbls for oil.

Editing by Reiner Simanjuntak