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Total, Inpex waiting for government approval over Mahakam block interest

Mahakam Block

JAKARTA (RambuEnergy.com) – Total E&P Indonesie and its non-operating partner Inpex Corp have been developing the aging Mahakam Block in East Kalimantan for over 40 years. However, their existing operatorship will come to an end by end of this year and will transfer the operatorship right to the Indonesian state-owned energy company Pertamina.

Currently, Total and Inpex Corp own 50% working interest each in Mahakaam Block.

Under the new production sharing contract (PSC), Pertamina will become the operator starting from Jan. 1, 2018. The Indonesian government has given full responsibility to Pertamina to develop the block from early next year, but at the same time given an opportunity to the existing operator Total E&P Indonesie and Inpex to take part in the project under the new PSC scheme.

Under the previous agreed scheme, Pertamina would 70% participating interest and the existing operator Total, along with Inpex, would be offered interest of 30%. Pertamina has agreed to allocate the 10% percent of its interest to the local governments in East Kalimantan – provincial and regency governments.

However, recently, Total and Inpex have conveyed their interest to hold 39% participating interest in the Mahakam Block. The Energy and Mineral Resources Ministry has said that it would be business-to-business talks between Total, Inpex and Pertamina, but gave greenlight of its agreement for Total and Inpex to jointly own 39% interest.

In latest development, Pertamina has sent a letter to the Energy and Mineral Resources Ministry over the request of Total E&P Indonesie and Inpex Corp to raise its proposed participating interest in Mahakam Block to 39% from 30% proposed earlier.

Director for Investment Planning and Risk Management of Pertamina Gigih Prakoso said Pertamina has been in talks with Total and Inpex over the said interest. Pertamina, he said, has also sent a letter to the Energy and Mineral Resources Ministry, however, the company has yet to receive the answer.

The firm decision of the energy ministry is needed because under previous energy minister Sudirman Said, it was stated that Total and Inpex will be given a maximum interest of 30% in Block Mahakam under new PSC contract.

Mahakam Block, although it is an aging block, remains as the largest gas producer in Indonesia. Industry players and the government are still hoping the existing operator will take part in the new PSC in order to assure that the block’s production will not be disrupted.

Bambang Manumayoso, President Director of PT Pertamina Hulu Indonesia, the parent company of PT Pertamina Hulu Mahakam, said Pertamina has proposed production projection to the SKK Migas amounted to 48,000 barrels per day and 1,100 million standard cubic feet (MMSCFD) of gas. In order to reach the target, PHM is developing 55 development wells and work over on 125 wells.

To achieve this, Pertamina sets aside investment of US$700 million next year or Rp 9.45 trillion in 2018. In addition, Pertamina will embark on cost efficiency in drilling activities.

Mahakam Block has been operated by Total E&P Indonesia since 1966. Mahakam PSC contract was last extended in 1997. The block has a number of fields, namely Peciko, Tunu, Tambora, Sisi-Nubi, South Mahakam, Bekapai and Handil.

The block covers an area of 2,738.51 sqm, located in East Kalimantan. The block’s average annual production reaches 1,635 MMSCFD of gas and 63,000 bopd of crude oil. (*)

Written by Roffie Kurniawan, email : roffie.kurniawan@gmail.com

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