Pertamina confident to be able to maintain Mahakam block production

PT Pertamina Hulu Mahakam (PHM), an indirect subsidiary of state-owned oil and gas company PT Pertamina, is confident it will be able to maintain production at the Mahakam block, one of the country?s major natural gas sources, when it assumes operatorship of the block starting January 1, 2018.

Pertamina said in a statement on Wednesday that PHM has taken a number of measures during the transition period in 2017 as well as plans additional programs next year to achieve production target of 1,100 mmscfd of gas, and 48,000 bopd of oil as set under the 2018 state budget draft.

?We?re confident we can (maintain production level). And so far, we have proven it with drilling program in line with target, at a more efficient cost and faster drilling time,? said PHM President Director Bambang Manumayoso in the statement.

PHM, a subsidiary of PT Pertamina Hulu Indonesia (PHI), which is a subsidiary of Pertamina, will take over the operatorship of the Mahakam block in East Kalimantan Province from Total E&P Indonesie starting January 1 after the latter?s contract expires by the end of 2017. Total and partner Inpex have been developing the block since the past 50 years. The foreign firms signed the first production sharing contract in 1966, which was renewed in 1997 for another 20 years.

Total, which started production at the Mahakam block in 1974, sought for another extension of its contract in 2008, but the government decided in 2015 to transfer the block entirely to Pertamina, which made the request in 2009, after the current contract expires at the end of 2017. Then minister of energy and mineral resources Sudirman Said decided at the time to allow Pertamina to offer up to 30 percent participating interest in Mahakam block to Total and Inpex for their continued role in the future development of the block amid concerns over Pertamina?s capacity in maintaining the block?s production. Current Minister of Energy and Mineral Resources Ignasius Jonan recently issued a new policy, allowing Pertamina to offer up to 39 percent participating interest to help lure Total to continue participation in Mahakam block, which is estimated to still hold 4.9 tcf of gas and 57 million barrels of oil reserves.

Pertamina, however, has repeatedly said it was only willing to offer up to 30 percent interest under the new Mahakam block contract to would-bed partners including Total and Inpex, and insisted it has the capacity to maintain Mahakam block?s production level.

Bambang said in the statement that a number of measures that has been taken by Pertamina during the transition period in 2017 to help maintain production level in Mahakam block include the transfer of around 98.23 percent of Total E&P Indonesie?s workers to PHM, and drilling of 14 wells (out of the target 15 wells).

Bambang said that in 2018, Pertamina is ready to drill 65 development wells in Mahakam block, higher than initial target of 55 wells. ?We?re also preparing investment cost of US$700 million and operational cost of $1 billion,? he said.

Bambang also pointed out that Pertamina has been successful in operating the Offshore North West Java block, taken over in 2009, where oil and gas production has increased by 74 percent in the past five years. The company has also been successful in operating the West Madura Offshore block, taken over from Kideco in 2011, where production increased by 48 percent during the past four years.

?These all are concrete evidence that Pertamina is ready to operate Mahakam block and to increase production,? he said.

Editing by Reiner Simanjuntak