Pertamina unlikely to takeover East Kalimantan block

Petromindo|Boim

State-owned oil and gas firm PT Pertamina has recently concluded its economic evaluation of eight oil and gas blocks which will be transferred to the company after the current contracts expire next year, Kontan reported on Monday.

The paper quoted Pertamina Upstream Director Syamsu Alam as saying the company is unlikely to takeover the East Kalimantan block after the current contract of Chevron Indonesia expires due to the huge abandonment and site restoration funds that must be provided by Pertamina.

?Under a new regulation, (Pertamina) must shoulder the ASR funds, which is quite huge,? Syamsu told the paper. Under the previous regulation, oil and gas contractors were not required to allocate the ASR funds. But the government has now required new oil and gas contracts to include requirement for the contractors to provide the ASR funds.

The government has decided to transfer the eight oil and gas blocks to Pertamina when their current contracts expire. The government will apply the recently-introduced gross split mechanism in the new production sharing contracts, replacing the previous cost recovery system, which means that contractors will no longer get reimbursement for their expenses from 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.

Syamsu said that Pertamina has asked for more time to make evaluation of the East Kalimantan block investment.

Meanwhile, Director General of Oil and Gas IGN Wiratmaja Puja said the government has yet to decide what incentives to be given to Pertamina. ?We must first study the results of the Pertamina evaluation,? he said. (*)