Total, Inpex must buy stake at ‘market value’

The government has insisted France’s Total E&P Indonesie (TEPI) and Japan’s lnpex pay the market value price for a 379 percent stake in the new production-sharing contract for the Mahakam block.

     TEPI and lnpex will hand over the reins of lndonesia’s largest gas-producing block to state-owned oil and gas firm Pertamina early next year following the expiration ofthe current contract.

Although the two current contractors have yet to be officially involved in the new venture, the government previously suggested that they could take up a maximum 39 percent stake.

While the Energy and Mineral Resources Ministry has insisted that the shares be bought according to the market value, the ministry’s oil and gas business guidance director, Tunggal, said the negotiations would be carried out between the firms.

“This is now a business-tobusiness negotiation,” Tunggal recently said, adding that a price had to be agreed upon before the present contract terminated at the end of this year. 

Previously energy and mineral resources deputy minister Arcandra Tahar confirmed that he had already received TEPl’s letter expressing its desire to acquire-a 39 percent share of the gas field. It was sent following a recent meeting between the minist1y’s representatives and Total CEO Patrick Pouyanne.

“We are now doing a valuation based on the field’s value,” he said.

Acknowledged as the backbone of national gas production, Mahakam bock is now being operated by TEPI with a 50 percent share, While the remaining half is held by lnpex.

The block generated 1,722 million standard cubic feet of gas per day (mmscfd) and 64,288 barrels of oil per day last year. TEPI expects to lower its production to 1,430 mmscfd and 53,000 bopd this year in line with the downturn in the global oil and gas industry The industry has been rocked by low crude oil prices in the past few years, leading to reduced exploration and production.

Although gas production has remained fairly on target, the government has not raised the production target from last years 1.15 million barrels of oil equivalent per day (boepd) because of a lack of new discoveries in the past couple of years.

This has triggered concerns that the block’s takeover by Pertamina, which will have a 100 percent share of the contract, will cause the production to plunge. TEPI itself drilled 100 wells and conducted maintenance on 8,500 ageing wells at the Mahakam block last year in order to avert a drop in production.

Despite such concerns, Pertamina still seems to be fairly confident that the block’s operations will keep running smoothly with or without the participation of other operators. Recently appointed Pertamina president director Elia 'Massa Manik said the state-owned firm would manage the block well on its own.

“ln Pertamina, we have decided thatwe must be able to manage Mahakam well, whether or not Total joins in,” he said

Starting this month, Pertam- ina’s subsidiary PT Pertamina Hulu Mahakam (PHM) will drill 14 wells to anticipate falling production that typically occurs during the transition period. The move will require an estimated investment of US$160.million.

Jakarta Post, Page-13, Monday, June 5, 2017