Indonesian Government Tells Pertamina to Resubmit Mahakam Block Proposal

Indonesia's Ministry of Energy and Mineral Resources told state-owned oil and gas company PT Pertamina to resubmit its proposal to take over operations at the expiring Mahakam block offshore East Kalimantan, a senior official said, as reported Wednesday in local daily Jakarta Post.

“We asked it [Pertamina] to make a suggestion and we have received it. However, we have asked it to improve and widen the analysis [in its proposal],” I Gusti Nyoman Wiratmaja, Acting Director for Oil & Gas in the Ministry of Energy and Mineral Resources said.

Pertamina has repeatedly expressed its interest in taking over the gas-rich Mahakam block -- currently operated by France's Total S.A. in a 50-50 partnership with Japan's Inpex Corp. -- when the production sharing contract expires at the end of 2017.

Pertamina's proposal on the Mahakam block needs to contain more in-depth and broader analysis given current fluctuations in global oil prices, which can impact on investment costs and potential revenue to the state, Wira said.

“We hope the analysis can be completed in April. We will then discuss it again before making a final decision. I hope it can be decided soon,” he added.

Pertamina had earlier proposed to invest $25.2 billion in the Mahakam block over 20 years based on an oil price of $100 per barrel, Jakarta Post said.

Separately, the ministry is preparing a regulation on participating interests or the proportion of production and exploration ownership in oil and gas working areas, with around 10 percent of oil and gas production and exploration ownerships going to regional administrations.

“We do hope that the allocated 10 percent of shares can really go to local administrations. They can do it in various ways, such as by inviting national banks and Pertamina, which are 100 percent owned by the state, and provincially owned enterprises."

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