Government to Grant Pertamina 70% Stake in Mahakam Gas Block

University students protest in Surabaya for the government to take back control of the Mahakam block from its French and Japanese operators. (Antara Photo/Zabur Karuru)

By : Rangga Prakoso | on 7:45 PM June 19, 2015
Category : Business, Economy, Featured

Jakarta. Indonesian state-owned oil and gas firm Pertamina will take a 70 percent stake in the Mahakam natural gas block when the permit of its current operators runs out at the end of 2017, the government said on Friday.

Sudirman Said, the minister for energy and mineral resources, said in Jakarta that Pertamina would work with the blocks current operators, Total of France and Inpex of Japan, after their permit expired on Dec. 31, 2017.

Total and Inpex are 50-50 stakeholders in the block, but will see their combined share go down to 30 percent once Pertamina takes over.

“Afterward, Pertamina can decrease its stake by selling shares to other parties in a manner that makes maximum business sense,” Sudirman said at a press conference.

He said further discussions would take place next week on safeguarding the interests of local operators in East Kalimantanm where the block is located. The ministry will also continue talks with Total and Inpex regarding the shares.

Sudirman said the decision was based purely on business calculations, with political no pressure on the government to decide one way or another.

“There was no pressure on the president. All parties to the discussion had business in mind when we talked about the share of ownership,” he said. “The government took part in the discussion because Pertamina and the two other operators asked us to join.”

Pertamina’s president director, Dwi Soetjipto, said the company was making preparations ahead of taking over the block on Jan. 1, 2018.

They include  preparing for goods and service procurements to support the operation, transitioning the information technology system, preparing financial, contracts and human resources divisions, and other tasks necessary to ensure a smooth transition.

“It will be important for us to have the existing operators involved in managing the Mahakam block,” Dwi said, adding he also expected support from the energy ministry.

Dwi said Pertamina would need around $2.5 billion in annual investments in Mahakam for prospecting for new oil and gas reserves.

Pertamina is also in talks with workers on the Mahakam block, who will officially become Pertamina employees when it takes over. “Because most of the employees are Indonesians, they want to join Pertamina,” Dwi said.

The Mahakam block produced 1.76 billion cubic feet per day (bcfd) of gas last year. Production is expected to slow to 1.7 bcfd this year, Reuters. reports.

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