One of Mahakam Block processing facilities in East Kalimantan (Photo source: SKK Migas)

JAKARTA (TheInsiderStories) – Japan’s INPEX Corp. will release its interests in two production-sharing contracts (PSC), namely the offshore Mahakam Block and the Attaka Block located in East Kalimantan, both of which are due to expire at year-end.

As for the Attaka block, INPEX is in talks on the handover process both with the government and U.S oil producer Chevron Corp.

The INPEX decision means that only Total E&P is likely to become private sector partner of Pertamina in developing the Mahakam Block under the new production sharing contract scheme.

Total E&P Indonesie has been operating the giant Mahakam Block for over 40 years, in partnership with INPEX (non-operating partner). The last contract extension was made in 1997. Effective Jan. 1, 2018, the state-owned oil and gas company PT Pertamina will control the Mahakam Block from current operator French petroleum company Total S.A.

Minister of Energy and Mineral Resources (MEMR) Ignatius Jonan has given the blessing to Total E& P Indonesie to get 39 per cent of Mahakam Block participating interest. Previously, the ministry only rationed 30 per cent share for Total E&P in the Mahakam Block.

Earlier, Total E&P Indonesie and INPEX sent a letter of interest to take part in the Mahakam Block after their contract expires on Dec. 31, 2017. They requested a 39 per cent share. Total E&P Indonesie has been in talks with the Energy and Mineral Resources Ministry and Pertamina to obtain 39 per cent stake in Mahakam Block under the new production sharing contract scheme, starting from Jan. 1, 2018.

Should the government agrees to handover the 39 per cent of Mahakam Block interest to Total, Pertamina will own 51 per cent of the Mahakam Block interest, and the remaining 10 per cent will be owned by local governments – the East Kalimantan Provincial and regency governments.

Previously, the former Minister for Energy and Mineral Resources Sudirman Said decided to give maximum of 30 per cent participating interest in the Mahakam Block under the new PSC scheme.

Meanwhile, the current Energy and Mineral Resources Minister Iggnasius Jonan has agreed the share down of Mahakam block as much as 39 per cent.

Although the energy ministry has made the decision, President Director of Pertamina Elia Massa Manik said the company’s board welcome if other investors are interested to have stakes in the Mahakam Block.

Besides Total and INPEX, he added, there are also companies from the United Arab Emirates, Mubadala Petroleum, which has expressed interest to partner with Pertamina in the Mahakam Block.

Meanwhile, the Special Task Force for the Upstream Oil and Gas Business Activities stated that the asset value of the Mahakam Block as of Dec. 31, 2017 stands at US$3.45 billion. To obtain the 39 per cent participating interest.

On the other hand, to operate the Mahakam block next year, Pertamina has budgeted $1.8 billion.

Written by Linda Silaen, Email: linda.silaen@theinsiderstories.com