Pertamina, Total mull Mahakam block swap agreement

State oil and gas company PT Pertamina and French energy giant Total SA are studying the option of swapping assets that will pave the way for the former to take a stake owned by the latter in the gas rich Mahakam block in East Kalimantan.

?The swap agreement will allow Pertamina to get into the Mahakam block and Total into our working areas,? Pertamina?s upstream director Bagus Setiardja said on Wednesday.

?Furthermore, the swap agreement will allow us to enter the Mahakam block without spending any money. We expect the swap agreement can be signed in August," he added.

Bagus said Pertamina proposed the swap option following the resistance faced by the firm to get a stake in the block.

The Mahakam block is the main gas supplier to the Bontang LNG plant in East Kalimantan which has LNG contracts with Japanese buyers. It was the Japanese buyers who demanded that the existing ownership structure of the block be maintained as a requirement to extend the contract to purchase gas from the block.

Total operates the block with a 50 percent stake, in partnership with Japan ?s Inpex, which controls the other 50 percent.

Bagus said Pertamina is offering its working areas in Kalimantan and Sulawesi in exchange for the Mahakam stake.

Pertamina eyes 15-20 percent stake in Mahakam in the beginning and plans to its stake to become a majority shareholder after 2017 when Total Indonesie?s contract over the block expires.

The government fully supports the plan. (bernard)