Jakarta. Indonesia’s state-run oil company PT Pertamina will operate the Mahakam natural gas block offshore East Kalimantan starting from Jan. 1, 2018, the country’s energy minister told reporters on Friday.

Minister Sudirman Said said Pertamina had met on Friday with Total and Inpex, the current operators of the block, to discuss the transition process.

Analysts have questioned Pertamina’s technical and financial capacity to operate Indonesia’s single-largest source of natural gas and maintain its production level — around 1.76 billion cubic feet per day (bcfd) last year and expected at around 1.7 bcfd this year. The Mahakam block is the main source of gas for Indonesia’s Bontang liquefied natural gas (LNG) plant in East Kalimantan.

“There will be further discussion within two weeks to decide how Pertamina would be involved in the transition process, and how the operation would be after 2017, and whether Total would still have a participating interest,” the energy minister said, adding that Pertamina would own a majority stake.

Pertamina and its future partners should sign a new production sharing contract with the government before the current contract expires in 2017, Said said.

Pertamina had earlier said it would invest around $2 billion annually into the gas block if given control of Mahakam, and target output of 1.2 bcfd to 1.5 bcfd.

“One thing that we have conveyed is that we don’t want production to be disrupted,” Pertamina’s chief executive Dwi Soetjipto said on Friday, adding that Pertamina is prepared to finance the operation.

Officials from Total and Inpex declined to comment.

Indonesia is one of the world’s top five LNG shippers, although its exports have been declining in recent years. With domestic output slipping and local demand growing, the country has begun consuming more of its own production and seeking overseas supplies.

Reuters

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Source: The Jakarta Globe