Indonesia' government has agreed to extend the production sharing contract for the Corridor oil and gas block in South Sumatra with ConocoPhillips, Spain’s Repsol SA and Pertamina - Photo: the Ministry.

JAKARTA (TheInsiderStories) – Indonesian government agreed to extend the production sharing contract of the Corridor oil and gas block in South Sumatra with US-based ConocoPhillips (NYSE:COP), Spain’ Repsol SA and PT Pertamina, the energy and mineral resources (EMR) ministry announced on Monday (07/22).

The existing contract will expired on December 2023 and the ministry has agreed to extend by 20 years to 2043. The signing of the agreement has been signed by Minister of EMR Ignatius Jonan and the entities.

The production sharing contract, which will be under a gross split scheme and within a month after the signing of the agreement will be follow by financial obligations to the government, he said.

Under the new agreement, ConocoPhillips’ participating interest in the block will be cut to 46 percent from 54 percent currently. Pertamina’ interest up to 30 percent from initially 10 percent and Repsol will have a 24 percent interest in the block, the minister said.

The estimated investment value of implementing the first five-year work commitment is US$250 million and the signature bonus also with the same amount. The government advised the contractor to continue to increase exploration and production activities on the Corridor block.

Corridor is Indonesia’ second-largest gas-producing block, with 827 million standard cubic feet per day of gas lifting in the first semester this year or 148,000 barrel of oil equivalent per day, according to upstream oil and gas regulator, higher than the 810 mmscfd targets. Under the new contract, the contractors will have 53.5 percent of the gas produced from the block and 48.5 percent of the oil.

The unit, ConocoPhillips Indonesia, will operate the block until 2026 before starting to transfer the operatorship to state-owned holding company, Jonan stated. He adds, there was no set time frame for the transfer but he assured after a reasonable length of the transitional period, ConocoPhillips will transfer operatorship to Pertamina.

He continued, the ownerships will not change after ConocoPhillips transfers the operatorship to Pertamina. But, the minister said, the contractors will be obliged to offer a combined 10 percent of participating interest in the block to a municipally-owned company.

While, Arcandra Tahar, deputy minister of EMR, added that the government has also prepared three exploration oil and gas blocks to be launched next week. Previously the block had been exhibited to foreign oil and gas companies.

The ministry previously offered seven oil and gas blocks to several foreign oil companies, but only three oil and gas blocks were auctioned. According to Tahar, the three oil and gas blocks auctioned in the third phase of 2019 are exploration blocks and have never been auctioned before.

The auction scheme used is regular. But he cannot mention which oil and gas blocks will be auctioned.

The government is indeed aggressively auctioning off oil and gas blocks, this is to boost the increase in oil and gas reserves. Earlier in the second phase of the auction in 2019, the government offered four oil and gas blocks.

Two of them are new blocks, namely the Kutai and Bone blocks. While the others are blocks that have been auctioned in the first stage, namely the West Ganal and West Kampar blocks.

Currently, the winner of the second phase of the oil and gas block auction has not yet been announced, even though the government doesn’t need to wait for the second stage of the auction results to open the next auction, Tahar said.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com