TotalFinaElf seeks early contract renewal for Mahakam block

French energy giant TotalFinaElf is seeking for early contract extension of Mahakam production sharing contract (PSC) in East Kalimantan 15 years before its current contract ends, Pertamina president Baihaki Hakim said during a parliamentary hearing Monday.

Mahakam PSC is a giant gas block located in the delta of Mahakam river where TitalFinaElf pumps 2.4 billion cubic feet of natural gas daily from several gas fields to feed Badak natural gas liquefaction (NGL) plant in Bontang. The block was awarded in 1967 for 30 years until 1997. In 1991 the contract extension until 2017 was granted.

An industry source said further contract extension would be necessary to justify huge investment TotalFinaElf would spend in Mahakam over the next few years.

?The extension would also enable TotalFinaElf to further develop gas field within the block,? the source said.

The source also anticipated slower future LNG sales, which would mean TotalFinaElf required longer time to pay back its investment.

Meanwhile, chairman of Commission VIII of the House of Representative Irwan Prayitno said that the PSC early contract extension said basically House had no problem with early contract extension.

?It is understandable that contractors seek for early renewal because they will be spending a lot of money. But public must see this process transparently to avoid accusation of corruption, collusion and nepotism,? he said. (alex/godang)