Total still wants slice of Mahakam pie

GAS-RICH BLOCK

France’s Total E&P Indonesie has submitted a proposal to state-owned energy giant Pertamina to obtain a stake in the gas-rich Mahakam block for a period of three years.

the Mahakam block

     Pertamina, through its subsidiary PT Pertamina Hulu Indonesia (PHI), officially took over Mahakam on Jan. 1, 2018, from Total and Japan’s Inpex Corporation, Which had operated the block since Oct. 6, 1966.

      As mandated by Energy and Mineral Resources Minister Ignasius Jonan, PHI currently controls a 90 percent stake in Mahakam, while the remaining 10 percent has been granted to Kutai Kartanegara regency and East Kalimantan province where the block is located.

Ignasius Jonan

    Jonan also allowed Pertamina to offer 39 percent of its 90 percent stake to any partners, including Mahakam’s previous operators Total and Inpex, based on a business-to-business approach.

  Subsequently Total has submitted the so-called bridging proposal to Pertamina, Which, if approved, will pave the Way for the French company to extend its operations in Mahakam for only a short run.

“It [Total] still Wants to have a stake in Mahakam, but only for three years,” Pertamina president director Elia Massa Manik said on Monday Without disclosing whether Pertamina would approve such a proposal.

The Upstream Oil and Gas Regulatory Special Task Force (SKK-Migas) previously stated that Mahakam’s assets had been Worth $4.79 billion as of December 2015, according to a calculation made by asset valuation firms IHS Vantage and PetroPro.

Nonetheless, the value was projected to depreciate to $3.45 billion by December 2017, especially considering Mahakam’s declining production rate. With this calculation, 39 percent of Mahakam is equal to $1.34 billion.

ln August 2017, the Energy and Mineral Resources Ministry stated it had rejected Totals request for several incentives if it acquired a stake in Mahakam after the block was taken over by Pertamina. The incentives included a reduction in First Tranche Petroleum (FTP) and investment credit. 

Arcandra Tahar

        Deputy Energy and Mineral Resources Minister Arcandra Tahar said several investors had shown an interest in grabbing the 39 percent stake in Mahakam, including the United Arab Emirates-based Mubadala Petroleum.

It is crucial for Pertamina to team up with heavyweight partners to make the most of the mature, depleted Mahakam, Which had proven reserves of 4.9 trillion cubic feet (tcf) of natural gas, 57 million barrels of oil and 45 million barrels of condensate as of 2016.

      Pertamina has set a target to produce 42,010 barrels of oil per day (bopd) and 916 million standard cubic feet per day (mmscfd) of gas from Mahakam in 2018, down from the average of 52,000 bopd and 1,360 mmscfd of gas as of November 2017.

"We can only pluck the fruit from Mahakam long in the future. But now, we need to invest a huge amount of money first in order to maintain the production of the block,” Pertamina’s Elia said.

The Jakarta Post, Page-13, Tuesday, Jan 9, 2018