Indonesia to revise up Total and Inpex's possible stake in Mahakam block

Indonesia to revise up Total and Inpex's possible stake in Mahakam block

The Indonesian government has opened up the potential for France's Total and
Japan's Inpex to take a combined 39% operating interest in the new
production sharing contract for the offshore Mahakam oil and gas block --
the country's largest.

The share would represent an increase from the figure quoted in a letter
from previous energy and mines minister Sudirman Said to state-owned
Pertamina allowing the oil and gas company to sell a maximum interest of 30%
in Mahakam, a senior official at the Energy and Mines Ministry said Friday.

"The revised letter from the energy and mines ministry that will be given to
Pertamina is still being processed," energy and mines ministry spokesman
Dadan Kusdiana said. "It will be issued as soon as possible. Based on the
energy and mines ministry's referral, the share at the Mahakam block could
be up to 39%. However it doesn't mean that Pertamina has to share down 39%
of its stakes to Total and Inpex. It could be to other companies."

"The figure also depends on business to business discussions. The government
will not interfere with the discussions. We are only opening a chance to
increase the share down in a bid to ensure that production at Mahakam is
stable," Kusdiana said.

However, the government has still not accepted Total's request for
additional incentives regarding Mahakam's new contract, Kusdiana said.

Total has requested an investment credit from the Indonesian government of
17%, and has called for the oil and gas allocated for the domestic market to
be priced against international benchmarks, a ministry official has
previously said.

Oil and gas companies operating in Indonesia have to allocate 25% of their
production to the domestic market.

Pertamina communication vice president Adiatma Sardjito declined to comment
on the matter.

"We are still in the business discussion stage, it can't be disclosed,"
Sardjito said.

Under the existing contract due to expire in December, Total and Inpex hold
50% of the block each.

The government has appointed Pertamina to fully take over the Mahakam block
once the contract expires. The Indonesian company plans to spend $75.3
million over its new three-year contract starting in 2018.

It also plans to spend $180 million on the block in 2017, a year before it
is allowed to take over, in a bid to maintain Mahakam's production at 1
Bcf/d or higher through 2018 and meet gas contractual commitments, as well
as to contribute to Indonesia's wider goal of reducing upstream production
decline.

Pertamina aims to drill 14 to 15 wells at the block this year and began work
on this in August.

The Mahakam block is Indonesia's largest gas block and began production in
1977. It currently produces 1.6 Bcf/d of gas and 63,000 b/d of crude and
condensate, with more than 80% of its output supplying the nearby Bontang
liquefaction plant and shipped overseas as LNG.

Total estimates that the Mahakam block contains 2.7-3 Tcf of proven natural
gas reserves in 2017. The proven gas reserves are estimated to dwindle to
1.3-1.6 Tcf in 2018 due to natural depletion.

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Link to Original Article:
https://www.platts.com/latest-news/oil/jakarta/indonesia-to-revise-up-total-
and-inpexs-possible-26805215

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com