Pertamina wants priority when block contracts expire

JAKARTA. The government suggested that the revision of the 2001 Law on Oil and Gas prioritize state oil and gas company PT Pertamina to take over expire block contracts.

Pertamina would be encouraged to take majority stakes and operate blocks when previous operator contracts expired, Energy and Mineral Resources Deputy Minister Widjajono Partowidagdo said on Monday. He added that if Pertamina declined to operate a block, the block would be offered to private national companies.

“However, the private national companies should be owned by Indonesians. We don’t want to give the blocks to companies that only use Indonesian names but are mostly owned by foreigners,” he said.

Widjajono added that if the previous block operators were big foreign companies, they would be persuaded to explore other blocks to discover new reserves.

“That idea will be included in the revision of the Oil and Gas Law so there will be a strong legal basis,” he said.

Pertamina spokesman Mochamad Harun revealed that his company had been waiting for that clause in the amendment of the Oil and Gas Law. He said that Pertamina had long since requested for priority status.

“The 2004 governmental regulation [on upstream oil and gas activities] stipulates that we can request to take over expired blocks, but when we submit the requests we don’t always receive positive responses [from the Energy and Mineral Resources Ministry],” he told The Jakarta Post over the phone.

He said Pertamina was ready and had both the technical and financial capabilities to take over the blocks. The company would also maintain investments when it operated the blocks so that their productions would not fall.

“If we can maintain production, the government’s revenues from the blocks will not decline,” Harun said.

In May, the government appointed Pertamina to operate the West Madura offshore block, but due to the time-consuming process of transferring authority, the production of the block, which was previously operated by Korean Kodeco Energy, fell from around 25,000 barrels of oil per day (bpd) to only 16,000 bpd.

However, Pertamina will not take over all expired blocks. It would set up a team to review each block’s potential and determine which were good for the company’s future, Harun explained.

Pertamina had asked the government to grant the right to operate 23 soon-to-expire blocks including Mahakam in East Kalimantan (operated by Total E&P Indonesie, Arun in Aceh (ExxonMobil), South Natuna Sea Block B (ConocoPhillips Indonesia) and Chevron Pacific Indonesia’s block in Riau (Rokan and Siak).

An energy expert from the ReforMiner Institute, Pri Agung Rakhmanto, praised Widjajono’s suggestion, saying it was very important for the government to prioritize national oil and gas companies to improve their capabilities.

“It’s even better if the government grants Pertamina special mining rights, meaning that the government will directly offer blocks with very rich reserves to Pertamina without any tender process,” he said.

Regarding the plan to persuade the previous operators of the expired blocks to explore other blocks, he claimed that it was a rational strategy. He added that it would not hamper the country’s investment climate in the oil and gas sector. (Rangga D. Fadillah/The Jakarta Post)