Pertamina Can Opt for Up to 15% Stake in Expiring PSCs in Indonesia

Indonesia's national oil company (NOC) PT Pertamina has an option to acquire up to 15 percent of expiring oil and gas blocks in the country if existing operators of production sharing contracts (PSC) are granted an extension by the state under new government regulation, local news daily The Jakarta Post reported Wednesday.

"The new regulation says that if a PSC in an oil and gas block is extended, Pertamina has the right to own a maximum 15 percent interest in it," according to the report.

The regulation is intended to support Pertamina’s efforts to boost its share of national oil production within the next five years by taking over the operation of expiring petroleum blocks.

In addition, the government set a deadline for Pertamina to submit a proposal to assume operations of expiring blocks from existing operators under the regulation.

Should the current operators propose extension for blocks with more than three years prior to PSC expiry, the NOC has to submit an operational plan within a year. Meanwhile for PSCs that expire within three years, Pertamina has to submit its plans of operatorship for these blocks within six months of the extension proposals filed with the government by existing operators.

Data from Indonesia's upstream regulator SKKMigas indicated that 32 oil and gas blocks are due to expire between now and 2024, with these blocks accounting for 72.5 percent of the country’s current oil and gas output. Given the the size of this production, there are rising concerns over the status of the expiring blocks, The Jakarta Post said.

In the meantime, negotiations between Pertamina and France's Total S.A. -- operator of the Mahakam PSC -- to sign an agreement to transit the operatorship of the East Kalimantan gas block are expected to be completed by the end of this month, I Gusti Nyoman Wiratmaja Puja, acting director general for Oil & Gas at Indonesia's Ministry of Energy and Mineral Resources (MEMR) told Rigzone May 4.

In March, the Indonesia government rejected the Mahakam PSC joint venture's requests for contract extension beyond end 2017 and the decision enables Pertamina to take over as field operator Jan. 1, 2018.

While the firm operates a number of oil and gas blocks in the country, Pertamina's contribution to domestic petroleum production is estimated at around 23 percent, below its counterparts in other countries.

“One of our focuses is to develop the upstream sector because we are currently only contributing around 23 percent to national production. National oil companies in other countries have bigger contributions,” Pertamina President Director Dwi Soetjipto said, as quoted in The Jakarta Post, adding that the firm hopes to grow its share to 50 percent.

During the first quarter of 2015, the company's oil production reached 267,480 barrels of oil per day (bopd), while gas production amounted to 1.622 million standard cubic feet per day (MMscf/d). Indonesia plans to produce 825,000 bopd in 2015.

Turning to senior appointments in Indonesia's MEMR, Wiratmaja Puja has now been appointed director general of Oil & Gas, being selected ahead of two other candidates -- former acting president director of Pertamina Muhammad Husen and president director of state-run Pertagas Niaga Jugi Prajogjo.


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