Pertamina to Work on Mahakam in Q2

State-owned oil and gas giant Pertamina will start drilling wells at the gas-rich Mahakam block next quarter to maintain production before taking over its operations from France’s Total E&P Indonesie (TEPI) next January. Pertamina offcially signed Mahakam bridging and funding agreements with current shareholders TEPI and Japan’s Inpex on Monday evening that would allow it to start drilling activities during the transition phase this year. 

It is committed to drilling 19 wells with an investment of US$1.5 billion this year, according to its work plan and budget submitted to the Upstream Oil and Gas Regulatory Special Task Force (SKK Migas). With such a move, it hopes to sightly deter any production drop next year. The new agreements also entail that Pertamina’s subsidiary, PT Pertamina Hulu Mahakam, will open a joint account with Total E&P Indonesie (TEPI)  to conduct these activities. “Mahakam block’s operatorship transfer to Pertamina Hulu Mahakam will help maintain production continuity,” Pertamina spokes person Wianda Pusponegoro said. 

Vice President Pertamina

Wianda Pusponegoro

Mahakam, acknowledged as the backbone of national gas production, is currently operated by Total E&P Indonesie (TEPI)  with a 50 percent share, while the remaining half is held by Inpex. Located in East Kalimantan, it is currently the country’s biggest gas producing block. The block generated 1,722 million standard cubic feet of gas per day (mmscfd) and 64,288 barrels of oil per day (bopd) last year. Total E&P Indonesie (TEPI)  expects to produce 1,430 mmscfd and 53,000 bopd this year. 

The oil and gas sector has been rocked by low crude oil prices in the past few years, causing weak exploration and production. Although gas production has remained fairly on target, the government has kept the production goal for this year similar to last year’s 1.15 million barrels of oil equivalent per day (boepd) owing to a lack of new discovery in the past couple of years. 

This has led to concerns that the block takeover by Pertamina will lead to a drop in production. Total E&P Indonesie (TEPI)  it self drilled 100 wells and conducted maintenance on 8,500 aging wells at Mahakam last year to maintain production. Even so, SKK Migas remains optimistic that Pertamina’s drilling activities will start on time this year to ensure production does not drop drastically. “TEPl’s activities are scheduled to be concluded by the end of the first quarter, while Pertaimina’s [activities] are expected to start in the second quarter,” SKK-Migas deputy head Zikrullah said. “Ideally, everything will start according to the program.” 

Although Pertamina is slated to control a 100 percent share of the block, it must divest 10 percent to the local administration and it is allowed to divest up to 30 percent of its ownership to partners. The government has recently hinted that Pertamina will be allowed to add 9 percent more shares on its offers to Total E&P Indonesie (TEPI)  and Inpex through business-to—business negotiations. 

The energy and mineral resources ministe expert staff for media relations, Hadi M. Djuraid, said even if Total E&P Indonesie (TEPI) and Inpex took the higher offer, Pertamina would remain operator of the block. Both Total E&P Indonesie (TEPI)  and Inpex have remained tight-lipped on the contractor share issue. Inpex’s vice president for corporate services, Nico Muhyiddin, said it would stick to any decision Total E&P Indonesie (TEPI)  made about its potential shares.

Jakarta Post, Page-13, Wednesday, March, 15, 2017