Total, Inpex may have to pay hefty price for interest in Mahakam block

Total E&P Indonesie, the current operator of the Mahakam block, and its partner Inpex Corp, may have to pay up to US$3.67 billion for a 39 percent participating interest in Mahakam block under a new contract with PT Pertamina Hulu Mahakam (PHM) as the new operator, Kontan reported on Thursday.

The paper said that based on valuation made by upstream oil and gas authority SKK Migas, as per December 31, 2017, the value of the Mahakam block assets is estimated at $9.43 billion, much higher than the $3.45 billion estimate made in 2016 by independent appraisers IHS and Petropro, which were assigned by SKK Migas.

Head of Communications and Program Division at SKK Migas, Wisnu Prabawa Taher told the paper that the increase in the value of the Mahakam block assets was partly attributed to the current rise in the price of oil. He acknowledged that the new valuation was not made by independent party but by SKK Migas internal team.

The current contract of Total and Inpex is set to expire at the end of this year. The government has decided to transfer the Mahakam block, in East Kalimantan Province, to PHM, a subsidiary of state-owned oil and gas firm PT Pertamina. But PHM, which will be the operator of Mahakam block starting January 1, is allowed to seek partners including Total and Inpex by offering up to 39 percent participating interest in the block.

Pertamina Upstream Director Syamsu Alam said that the company will be engaged in business to business negotiation with Total and Inpex for possible continued participation of the two firms in future development of Mahakam block.

Syamsu told the paper that a number of other companies have also expressed interest to partner with PHM in developing the Mahakam block. He did not disclose the name of the firms.

Reports earlier said that Mubadala Petroleum of the United Arab Emirates has expressed interest in Mahakam block. (*)