Pertamina is projected to become the sole contractor in the upstream oil and gas industry as part of the government’s efforts to boost cost eficiency. The state-owned petroleum giant would be prioritized in all oil and gas working areas in the upstream industry after contracts with all contractors expire in the future, Energy and Mineral Resources Minister Ignasius Jonan said recently, adding that the upcoming assignment was based on an instruction from President Joko “Jokowi” Widodo.
The Energy and Mineral Resources Ministry’s Regulation No. 15/2015 already lays out several options. They include the options of Pertamina taking over the contracts, the government extending partnerships with existing contractors and Pertamina entering collaboration with the contractors themselves. As of November, there were 284 oil and gas working areas nationwide, down from 313 in January according to the Upstream Oil and Gas Regulatory Special Task Force (SKK Migas).
During the January to November period, those areas produced a total of 833 million barrels of oil per day (mbopd) and 7.9 billion cubic feet per day (bcfd) of gas. Contracts for 35 working areas will end in the period of 2017 to 2026, including contracts of French oil and gas giant Total E&P Indonesie that operates the gas-rich Mahakam block in East Kalimantan and US- based energy giant Chevron Pacific Indonesia that operates the Rokan block in Riau Islands.
Total E&P’s contract will expire in 2017, while that of Chevron’s will expire in 2021. “We hope Pertamina can further reduce the production costs after it takes over all of those areas. Other wise, there is no point of giving them such an assignment,” Jonan said, adding that Pertamina would still be able to form partnerships with foreign investors in the process. The government is also putting high hopes on Pertamina tightening its belt if the plan materializes. “Since you cannot manage the selling price of oil, you have to manage the cost wisely,” Jonan said.
Hadi lsmoyo, the secretary-general of the Indonesian Association for Petroleum Engineers (IATMI), said the government’s instruction to Pertamina was in accordance with Article 33 of the 1945 Constitution, which mandates state control over all natural resources in the country. “Private contractors can still join tenders for new working areas in future. lt doesn’t mean that we will close all of the opportunities for them,” he said.
On the other hand, the plan will force Pertamina to improve its Financial performance, considering the number of working areas it might take charge of in the future. “Pertamina will be flooded with oil and gas blocks. Hence, it needs a big amount of funds to manage all of it efficiently, including from global financial institutions. On the upside, though, existing working areas that have started producing oil and gas are relatively easy to manage compared to new ones,” Hadi went on.
Pertamina data show the company more than doubled year-on-year net profit to more than US$3 billion from January to November amid low global oil prices. It attributed the positive performance to efliciency measures worth up to $1.8 billion, including the renegotiation of contracts and operational cost cuts. At the same time, its overall short term loans decreased to $140 million from $4.98 billion in the same period last year.
Jakarta Pos, Page-15,Thursday, Dec,22,2016
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