Pertamina gets approval to operate West Madura block: Document

State oil and gas firm PT Pertamina (Persero)?s proposal to become the operator of the West Madura offshore block has been approved by the block?s other shareholders during a recent meeting between the shareholders and the government, The Jakarta Post reported.

However, Pertamina cannot directly take over the block?s operations when the contract expires on May 6 of this year, since a meeting on April 13 recommended that the government allow current operators, Korean-based Kodeco Energy to continue operating the oil and gas block until Dec. 31, 2013, according to a leaked document received by reporters on Wednesday that contained the meeting?s outcome.

In addition to approving Pertamina?s request to be the future operator of the block, the document also indicated that the company would increase its stake in the block from 50 percent to 60 percent on May 7.

?Under the new contract of the West Madura offshore block, which will last for 20 years starting May 7, the shareholder composition will be as follows: Pertamina 60 percent, Kodeco 10 percent, [China-based] CNOOC 10 percent, PT Sinergindo Citra Harapan 10 percent and Pure Link Investment 10 percent,? the document stated.

The document was signed by two representatives from upstream oil and gas regulator BPMigas, M. Teguh Pamudji and Ketut Budhiartha; two representatives from the Energy and Mineral Resources Ministry, Sutisna Prawira and Edy Hermantoro; a representative from Pertamina, Slamet Riadhy; a representative from Kodeco, Lim Suk Kyun; and a representative from CNOOC, Huang Chun Lin.

The meeting?s conclusion also said shareholders would give a six-month transition period before Dec. 31, 2013, for Pertamina to operate the block.

In this period, the positions of deputy general manager, vice president for accounting and operations manager would be filled by Pertamina representatives.

BPMigas spokesperson I Gde Pradnyana confirmed the validity of the document, but said agreements stated in the document were only recommendations to be delivered to the government. The final decision required Energy and Mineral Resources Minister Darwin Zahedy Saleh?s approval, he added.

?During the meeting, BPMigas only received agreements made by shareholders and reported them to the government. The government would make the final decision,? he told The Jakarta Post.

Pertamina spokesperson Mochamad Harun also said agreements made during the meeting were not final, adding that his company would wait for the official decision issued by the ministry.

Pertamina has lobbied the government to allow it to become the operator of West Madura offshore block when the current contract ends this year. The company said it has both the technology and financial capacity to operate the block and improve its production.

Pertamina had promised it would increase the block?s production from the current 13,400 barrels of oil per day (bpd) to 25,800 bpd in 2012, 32,500 bpd in 2013, 37,200 bpd in 2014 and 40,500 bpd in 2015.

Prior to March 31, Pertamina held a 50 percent stake in the block while Kodeco Energy and CNOOC had 25 percent stakes, respectively.

However, in a controversial transaction approved by BPMigas, dated March 31, PT Sinergindo Citra Harapan acquired a 12.5 percent stake from Kodeco and Pure Link Investment took over a 12.5 percent stake from CNOOC. (*)