Pertamina hopes revised law give it higher oil share

State-owned and gas company Pertamina is hoping that the amendment of oil and gas law being deliberated by legislators will allow the company to receive a larger share of oil production, The Jakarta Post reported on Wednesday.

Pertamina spokesman Mochamad Harun said the company expected the revision of the law would enable the company to increase its production take from new blocks to 40 percent.

?The split of 40 percent versus 60 percent must not only apply to our old blocks, but also our new blocks.

As a national oil company we should have the privilege to get 40 percent shares as this in the end will have a multiplier effect on the Indonesian economy,? Harun said, adding that the company?s 15 percent take of oil production from new blocks had stunted the company?s growth.

Currently, Indonesia refers to Law No. 22/2001 on Oil and Gas. Before the issuance of the law, Pertamina played two roles. The company operated as a business entity that owned production facilities, and also represented the government in negotiating oil and gas contracts with foreign and domestic private investor.

The company?s dual role led to a situation where the firm received different cuts of oil and gas production in different deals.

From oil blocks secured before the new law was implemented, Pertamina get around 40 percent of oil production. From blocks secured after the law was enacted, the company gets 15 percent of oil net production.

Pertamina and other oil and gas companies operate their oil and gas concessions under production sharing contracts.

Normally, contractors keep 15 percent of their oil production, giving the remaining 85 percent to the government. Under the production sharing contract, oil and gas contractors can ask for a refund for their operating costs.

Currently, Pertamina operates 22 domestic oil and gas upstream assets and eight overseas oil and gas upstream assets. In 2009 the company produced 184,000 barrels of oil per day (bpd) and 1.46 billion standard cubic feet of gas per day on average. As of August 2010, Pertamina?s average production for the year was 191,000 bpd of oil and 1.45 billion standard cubic feet of gas per day.

Milton Pakpahan, a member of House of Representatives commission VII overseeing energy and mineral resources, said the House had formed a special committee to deliberate a revision of the oil & gas law.

?We have drawn up a list of identifiable problems and will discuss this in our next sitting period from November to December this year,? Milton said.

Harun said Pertamina expected the new law would also regulate incentives for Pertamina?s refinery projects. Pertamina currently operates six refineries: the Cilacap refinery in Central Java; the Balikpapan refinery in East Kalimantan, the Dumai refinery in Riau, the Plaju refinery in South Sumatera, the Balongan refinery in East Java, and the Kasim refinery in Papua.(*)