We could even double production."Jakarta (ANTARA News) - State-owned oil and gas company Pertamina, which has officially been appointed to take over oil rich Mahakam Block in East Kalimantan, is optimistic that the management transition will run smoothly.
Pertamina Upstream Director Syamsu Alam said on Thursday that the government has issued an official letter appointing Pertamina to manage the Mahakam Block after the contract of the current operator, Total Exploration and Production (Total E&P) Indonesie, expires in 2017.
According to Alam, Pertamina received the letter from Energy and Mineral Resources Minister Sudirman Said on Tuesday night. Pertamina will take over the gas block from Total E&P Indonesie after the French oil giant ends its contract.
Pertamina will now discuss at length the transition period with Total E&P Indonesie, Syamsu Alam added. Alam is optimistic the transition of the management of the oil block from Total E&P Indonesie and Inpex Corporation will run smoothly as his company already has experience in that field.
"We are confident that we have the ability because we already have experience in Offshore North-West Java (ONWJ) and West Madura Offshore (WMO) working areas," Syamsu Alam told a seminar on efforts to safeguard oil and gas natural resources in Indonesia on Monday.
Syamsu Alam shared the experience transitioning from British Petroleum (BP) to Offshore North-West Java Pertamina Hulu Energy (PHE ONJW). He observed the transitional period was adequate as it enabled the company to maintain, and even increase, production.
"We could even double production," he noted.
He pointed out another case of the transition of WMO Blocks operation from Kodeco to PHE WMO that did not face any hurdle but saw a drop in production. He added the drop in production was because the transition was carried out just one day before the contract expired.
"For this WMO, we needed two years of transitional period to increase production," he added.
Syamsu Alam acknowledged that the management of the Mahakam Block has huge financial and technological responsibilities. Therefore, a longer transition period will be better to maintain the productivity of the oil field.
"The longer the transition period the better it is. So, we will use the two-and-a-half year transition period as well as possible. We will also utilize this time to discuss with other regions and partners their interest in participating," he remarked.
According to Widhyawan Prawiraatmadja, the head of the Working Control Unit of the Energy and Mineral Resources Ministry (ESDM), four years is ideal for an oil block management transitional period.
"The ideal transitional period is four years. But, for the Mahakam Block, which has a two-and-a-half year transitional period, the transition of the management will be done as well as possible by involving existing operators. This way we hope there will not be any significant drop in production," Prawiraatmdja explained.
Pertamina has expressed its preparedness to begin the transition in 2016 to 2017 and invest its capital by procuring a number of equipment and services. With this plan, it is expected that Pertamina will be ready to become the operator of the Mahakam Block by January 2018.
Energy and Mineral Resources Minister Sudirman Said stated earlier that proper transitional period will be needed to enable Pertamina to efficiently manage the Mahakam Block from 2017.
Minister Said expressed hope that Pertamina and Total E&P Indonesie would soon sign a head of agreement regarding the transitional period for the operatorship of the block.
The government expects the transition period to be for two years, from January 1, 2016, to December 31, 2017.
The Indonesian unit of the French oil and gas giant as the operator of the block has a 50 percent stake, with Japans Inpex Corporation holding the remaining 50 percent.
Total E&P Indonesie will end its contract after operating the block, one of the countrys largest gas reserves, for 50 years. The block produces gas equivalent to around 280,000 barrels of oil per day.
Meanwhile, Executive Director of the Indonesian Resource Studies Marwan Batubara appreciated the governments decision to allow state oil and gas company PT Pertamina to manage the Mahakam Block from 2018.
"I have high appreciation for Minister of Energy and Mineral Resources Sudirman Said who officially declared that Pertamina will manage the Mahakam Block from January 1, 2018," Batubara said in a written statement.
He noted recently that starting from 2017, the oil and gas reserves in the Mahakam Block can be exploited until 2023. It can continue even beyond that if it is expanded and explored further.
The rate of return of the Mahakam Block is still high, reaching 28.6 percent. With a high RoR, it will be easy for Pertamina to find funds for its working capital.
He pointed out in May last year that after Totals contract expires in 2017, there will still be untapped reserves of 8 trillion cubic feet of gas and 100 million barrels of oil.
Even after nearly half a century of exploration, the block is believed to hold oil and gas reserves worth Rp1,700 trillion, which can be exploited for another 20 years.
Total E&P Indonesie had been managing the Mahakam block contract since 1967. In 1997, it was extended for another 20 years, until 2017. Total E&P Indonesie has been partnering with Japans Inpex Corporation for exploring the Mahakam oil and gas field.
According to geologist Rovicky Dwi Putrohari, the Mahakam oil and gas block in East Kalimantan still has large oil and gas reserves.
"As a geologist, I see that oil and gas reserves in the Mahakam block are still large. It still holds a large upside potential, or resembles a field that has yet to be exploited," he explained.
Putrohari, who was the general chairman of the Indonesian Geologists Association, also stated that although the Mahakam block has witnessed exploration activities by the French company for some 50 years, its reserves have yet to be optimally tapped.
"Exploration at the Mahakam block has not reached the reservoirs yet. These are deeper and have larger reserves. If it can be reached, I think we will find larger volumes of reserves," he pointed out.
(T.A014/INE/KR-BSR/A014)
Reporter: Andi Abdussalam
Editor: Priyambodo RH
Copyright © ANTARA 2015
