Oilfields development
Total Appears Set to Get Mahakam Block Extension
Total E&P Indonesie, the local unit of French oil and gas giant Total, looks likely to receive an extension for its contract on the Mahakam block that expires in 2017.
Government officials and the upstream oil and gas regulator, BPMigas, have indicated their optimism over the firm’s investment in Indonesia and its plans to raise oil and gas production.
Total first proposed extending its contract in 2009. Contractors are allowed to propose extensions 10 years before their contracts expire. Lawmakers, however, pressured the government to revise its laws and allow state oil and gas company Pertamina first rights for expiring blocks, delaying Jakarta’s response.
Ownership of the nation’s oil and gas resources is politically sensitive, especially when it involves foreign investors.
Energy Minister Darwin Zahedy Saleh sent strong signals on Saturday that the government would likely extend Total’s contract for the block.
“In 2017, the Mahakam block contract expires. With good cooperation and positive contributions from Total, we [the government] will continue to cooperate with them,” he said.
Mahakam is located in East Kalimantan and consists of a number of fields, including Tambora, Tunu, Peciko, Sisi and Nubi. It produces 2,480 million standard cubic feet of natural gas per day and 93,000 barrels of oil and condensate per day.
Darwin’s statement was echoed by BPMigas chairman Raden Priyono. He said Total’s investment in Indonesia’s oil and gas sector was vital, particularly in meeting gas production targets in the next 5 to 10 years.
Gas production from Mahakam contributed 30 percent of the nation’s gas output last year.
Elisabeth Proust, president director at Total E&P Indonesie, said the company had proven its commitment to Indonesia with $944 million of investment to build four compression platforms in the Tunu field. The platforms are needed to push the low-pressure gas through the pipeline, which runs to the Bontang liquefied natural gas field.
Total plans to invest $16.5 billion until its current contract expires, including developing 297 new and existing wells and drilling projects for 41 offshore wells.
“To keep maximum production after 2017, the gas block will need an additional $6.75 billion in investment, which requires long-term preparation, recent technology, competent and well-trained human resources and strong financial capacity,” Proust said on Saturday.
The news did not quell Pertamina’s desire for a stake in the block, though.
“Total has already operated the Mahakam block for 50 years. Just trust us and we will develop the block,” Pertamina spokesman Mochammad Harun said on Sunday. “Our target is to buy 10 percent of Total’s stake by 2012.”
He said Pertamina hoped to buy another 5 percent in 2013.
Operators with production-sharing contracts, he said, tend to be hesitant about boosting production if they feel they do not have assurances of extending the contract. “In that case, we will take over the investment,” he said.
