Total, partner to invest $11b in Mahakam block

French energy giant Total and partner Inpex are pledging an investment of US$11 billion tap the remaining gas reserves in the giant Mahakam block offshore East Kalimantan should the company be granted contract extension on the block, which will expire in 2017.

Total President Exploration & Production Yves-Louis Darricarrere told Petromindo.Com on Monday that the company is aiming to invest massively to maintain production rate of 2.6 BCFD for a number of years to honor current and future LNG contracts.

?Contract extension (of Mahakam block) will provide platform for Total to continue operations in Indonesia on long-term basis,? he said.

Currently, he said, Mahakam block has 11 TCF of remaining recoverable reserves that would be exploited to meet domestic requirement and export demand.

The Mahakam block supplies about 80 percent of the feed gas for the Bontang LNG plant, also located in East kalimantan.

?Total has been operating in Indonesia for 40 years and we are looking to operate in another forty years,? he said, adding that Total is committed to support government?s program to provide LNG for domestic users and to provide income for the state through LNG export.

He did not disclose the length of the extension Total was seeking for Mahakam block, but Total E&P Indonesie General Manager Philippe Armand said last year that Total was seeking 10-15 years extension.

?Total is the first gas producer to sign deal to provide LNG to domestic costumers and simultaneously, we?re also finalizing LNG export deal with Japan?s Western Buyers,? Darricarrere said. Total and its Mahakam block Partner Inpex Corp. in July 4, 2008, had signed Memorandum of Agreement to sell 11.75 million tonnes of LNG from Mahakam block within 10 year?s time to a local consortium which comprised of state gas distribution firm PGN, state oil, gas firm Pertamina and state electricity firm Pertamina. Total will also supply 25 MT of LNG to a consortium of Japanese buyers grouped in Western Buyers from 2011 to 2021.

Armand also said last year that contract extension was necessary for Total and Inpex to invest to slow down the decline rate of the block as the rate of 2.6BCFD would start to decline after 2011.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro, meanwhile, said that the government will evaluate Total?s proposal for Mahakam block contract extension. ?We?ll review and negotiate terms and condition for the maximum benefit of the state,? he said. (alex/bernard)