Indonesian authorities rejects Exxon Mobil's proposal to boost Cepu block output (Antara Photo/Aguk Sudarmojo)

Govt Confirms East Ambalat Contract Transfer to Pertamina


MAY 26, 2016

Jakarta. The government has handed over the contract for East Ambalat's oil and gas block to Pertamina, a move expected to boost the state-owned energy company's oil and gas production for the next three decades, Sudirman Said, Minister of Energy and Mineral Resources, said on Wednesday (25/05).

Pertamina Hulu Energi Ambalat Timur, a subsidiary of Pertamina, will be responsible for developing the East Ambalat oil and gas block, located in the Ambalat Sea off Tarakan, North Kalimantan, in border areas between Indonesia and Malaysia.

US energy giant Chevron had relinquished the contract for the block previously, saying that Malaysia's claim over the border areas had increased tension between the two neighboring countries and made the block riskier to explore.

Wianda Pusponegoro, Pertamina's vice president of corporate communications, said Pertamina Hulu Energy will own the East Ambalat block outright. The East Ambalat Production Sharing Contract (PSC) will be valid for 30 years, with production in the first three years estimated to be worth $8.5 million.

Owning and operating the East Ambalat block will also boost Pertamina's contribution to national oil and gas production. Currently, the company contributes only around 26 percent of the total national oil and gas production.

The block lies 80 kilometers east of Tarakan at a depth of 2,000 meters, and covers a total area of 4,735 square kilometers. It is capable of producing as much as 40,000 barrels of oil per day.

The government also awarded a contract for the MNK Central Bangkanai block in Central Kalimantan to Indonesian coal mining company Adaro Energy.

Declining production

The awarding of the new contracts is part of the government's effort to boost oil and gas production from the country's 21.5 billion barrels of oil reserves which, due to their scattered locations in remote or hardly accessible places, become uneconomical to exploit amid declining global oil prices.

“We awarded fewer contracts this year, but we're still optimistic,” Sudirman told reporters at the 40th Indonesian Petroleum Association Convention and Exhibition 2016 in Jakarta.

Darmin Nasution, the Coordinating Minister for Economic Affairs, said earlier the government may modify the terms of its existing oil and gas contracts to attract more companies to invest in the country's oil and gas production.