Pertamina told to quickly decide on East Kalimantan block offer

Petromindo

Deputy Minister of Energy and Mineral Resources Arcandra Tahar said that state-owned oil and gas firm PT Pertamina should quickly make decision regarding the government?s offer for the company to takeover East Kalimantan block when the current contract of the existing operator expires next year, instead of asking for more time to carry out further evaluation.

Arcandra said in a statement on Thursday that the prompt decision of Pertamina is needed as the government wants to move quickly by offering the block to other prospective investors, if the state firm is not interested in the block.

He made the remarks in response to an earlier statement by Pertamina Upstream Director Syamsu Alam that the company is unlikely to take over the East Kalimantan block when the current contract of Chevron expires due to the huge abandonment and site restoration funds that must be covered by Pertamina. He, however, said that the company will ask from the government extra time to further make evaluation before making final decision.

The East Kalimantan block is one of the eight oil and gas blocks offered by the government to be taken over by Pertamina when the current contracts expire next year. The government will apply the recently introduced gross split mechanism in the new contracts for the blocks, under which contractors? expenses are no longer reimbursed by the government, in return for higher output split.

Under the gross split mechanism, contractors get an output split of 43 percent from oil and the remaining 57 percent goes to the government. The government, however, can provide another 5 percent split to the contractors as incentive depending on various conditions. This means that Pertamina can potentially get an oil split output of up to 48 percent from East Kalimantan block.

Editing by Reiner Simanjuntak