Pertamina Invests in Mahakam

The process of transferring the management of the Mahakam Block oil and gas field from Total E&P Indonesie to PT Pertamina has been completed. The Minister of Energy and Mineral Resources, Ignasius Jonan, gave his approval for the amendment to the Product Sharing Contract (PSC) for the Mahakam block in East Kalimantan. Starting next year, Pertamina will be able to enter for investment.

The PSC amendment for the 2018-2038 period was signed by Pertamina Hulu Mahakam, a subsidiary of Pertamina, and SKK Migas. This change has become the entry point for Pertamina to carry out the transition process since 2017.

Blogger Agus Purnomo in SKK Migas

"The process of managing the Mahakam Block has been completed. The agreement has been signed and can be implemented immediately.

Jonan explained that currently, the production of oil and condensate from the Mahakam field has reached 69 thousand BPD. Meanwhile, gas production reached 1,747 mmscfd. He stated that Pertamina would immediately invest in it so that when it became an operator in January 2018, production would not decline. 

Deputy Minister Arcandra added that before the signing was done, the two companies had repeatedly held workshops. Starting from the matter of technology transfer, licensing issues, to the Mahakam Block workers. On the 24th and 25th of November, he said, the Mahakam work program & budget (WP&B) has been finalized.

the Mahakam Block

He said Total has been carrying out activities in the black goldfield since 1966 or for 50 years at the Iranian refinery. Pertamina, who proved its capacity to manage the Mahakam Block, Head of SKK Migas Amien Sunaryadi explained, the amendment to the Mahakam Block PSC was also supported by the revision of the Minister of Energy and Mineral Resources Regulation number 15 of 2020 concerning 15 oil and gas working areas whose contract terms would expire. This change became the basis and legal protection that Pertamina could incur operating costs in 2017.

This expenditure will be recognized as cost recovery in 2018. At that time the PSC (Pertamina) came into effect. Because it is still an investment, the 19 wells drilled by Pertamina are not for production. However, these wells were closed and opened in 2018 to maintain performance. Meanwhile, Total's six wells are still producing as usual. Pertamina president director Dwi Soetjipto explained that the investment for the 19 wells was prepared at USD 180 million or around Rp 2.3 trillion.

When asked about what guarantees were given so that there would be no decline in production, Dwi stated that there was actually a natural decline. His team already knew that and started preparing. If nothing is done, production will decrease. 

In accordance with the projection, if you can enter early, the decline will not be too significant. After this, Pertamina Hulu Mahakam and Total will finalize the transfer of operatorship agreement (TOA) and bridging agreement. Both are expected to be completed by the end of November.

President Director of Total Hardy Pramono said next year's production might drop. Gas, for example, becomes 1.45 mmscfd. For oil, it also fell to 50 thousand BPD. Regarding the offer for Total to re-enter Mahakam with a share of 30 percent, there has been no decision. 

The reason is that at this time the most important thing is the process of transfer of management so that production does not decrease. He stated that there would be further discussion before Total took up the offer to cooperate. Especially the discussion about terms and conditions.

Jawa Pos, Page-6, Wednesday, Oct 26,  2016

Transfer to Manage Mahakam Block, Pertamina Prepares IDR 2.3 T

PT Pertamina has prepared an investment fund of USD 180 million or equivalent to Rp. 2.33 trillion to drill 19 wells as part of the transition period for the takeover of the Mahakam Block in 2017.

Investments were made to maintain the block's production level after the Mahakam Block Production Sharing Contract amendment was made. On Tuesday (Oct 25), the Minister of Energy and Mineral Resources, Ignasius Jonan, gave his approval for the Amendment to the Production Sharing Contract for the Mahakam block.

This step was taken to maintain the continuity of oil and gas production during the transfer of management of the Mahakam Working Area. This profit-sharing contract amendment is part of the process of transferring the management of the Mahakam Block from Total E&P Indonesie to PT Pertamina (Persero). 

As is known, Total's contract in Mahakam expires on December 31, 2017. Starting January 1, 2018, Pertamina becomes the new operator of the block which produces 1,740 MMSCFD of gas and 69,186 bpd of oil. Pertamina President Director Dwi Soetjipto said that the Mahakam Block amendment for the 2018-2038 period had to be carried out.

This step is also a way for Pertamina to make a good transition from 2017. This profit-sharing contract amendment, said Dwi, allows Pertamina to start the transition step in managing the Mahakam Block earlier. Namely as of January 1, 2017, with the aim of maintaining the production level of this largest gas-producing working area.

Next, we will have detailed talks with Total E&P Indonesie as the current operator to ensure the transition goes well. Dwi explained that Pertamina Hulu Mahakam had finalized the preparation of the 2017 Mahakam Block Work Program and Budget (WP&B).

Based on the WP&B, assisted by Total E&P Indonesie as the executor, Pertamina Hulu Mahakam has prepared drilling activities in 2017 with a target of 19 wells with an investment value of around USD180 million. So it is expected that natural gas production from the Mahakam Block can be maintained at around 1.2 BSCFD and condensate around 20,000 BCPD in 2018-2019.

Blogger Agus Purnomo in SKK Migas

SKK Migas is preparing technical instructions for the implementation of Pertamina Hulu Mahakam WP&B with the principle of activities carried out by Total E&P Indonesie on a no-cost no-profit basis. With all costs and activities risks borne by Pertamina Hulu Mahakam. 

The drilling well is targeted to start production on January 1, 2018. Pertamina Hulu Mahakam together with Total E&P Indonesie and Inpex Corporation is finalizing a management transfer agreement which includes a Transfer of Operatorship Agreement (TOA) and a Bridging Agreement (BA). The TOA which was signed by the parties on July 29, 2016, will be aligned with the amendments to the Mahakam Block PSC.

Meanwhile, a Bridging Agreement is required related to the assistance for the implementation of Pertamina Hulu-Mahakam activities by Total Indonesie in the 2017 period. We are targeting the completion of the Bridging Agreement and amendment of the Transfer of Operatorship Agreement by the end of November 2016.

Deputy Minister of Energy and Mineral Resources Arcandra Tahar said, in addition to the 19 wells drilled by Pertamina Hulu Mahakam (PHM/a subsidiary of Pertamina that will manage Mahakam) in 2017, Total also drilled 6 wells. Hopefully, it can take place according to the previously agreed plan.

The Mahakam Production Sharing Contract was signed between SKK Migas and PT Pertamina Hulu Mahakam on 29 December 2015 and will become effective on 1 January 2018. With this amendment, Pertamina will invest in drilling wells in the block on 1 January 2017.

Duta Masyarakat, Page-1, Wednesday, Oct 26, 2016

Pertamina Ready to Drill in Mahakam

PT Pertamina is preparing an investment of US$ 180 million in the transition period for the Mahakam Block management after obtaining certainty through an amendment to the production sharing contract for the working area.

Blogger Agus Purnomo in SKK Migas

The amendment was signed by Pertamina's subsidiary, PT Pertamina Hulu Mahakam (PHM), SKK Migas, Tuesday (Oct 25). Pertamina President Director Dwi Soetjipto said the amendment was a way for the company to enter the Mahakam Block starting next year. The previous Production Sharing Contract/PSC was signed on 29 December 2015 and will become effective on 1 January 2018.

This PSC amendment allows Pertamina to begin the transition to the Mahakam Block management earlier, namely as of January 1, 2018, with the aim of maintaining the production level of this largest gas-producing working area. 

Total Oil

Dwi revealed that PHM had compiled the 2017 Mahakam Block Work Program and Budget/WP&B and was being finalized. Based on the WP&B, assisted by Total E&P Indonesie (TEPI) as the executor, Pertamina Hulu Mahakam is preparing for drilling activities next year with a target of 19 wells with an investment value of around US$ 180 million.

Inpex Corporation

PHM together with TEPI and Inpex Corporation is finalizing a management transfer agreement which includes a transfer of operatorship agreement (TOA) and a bridging agreement (BA). The TOA which was signed by the parties on 29 July 2016 will be aligned with the Mahakam Block PSC amendment, while the BA is required in relation to Total assistance in the implementation of PHM activities in the 2017 period.

The Minister of Energy and Mineral Resources, Ignasius Jonan, explained that the amendment must indeed be carried out to provide legal certainty in the transition period of Mahakam Block management.

This amendment can also maintain the continuity of oil and gas production as well as provide legal certainty in the implementation of activities during the transfer of operation of the Mahakam block working area from the existing contractor Total Indonesie to Pertamina.

Head of SKK Migas Amien Sunaryadi said the amendment would allow PHM to spend on operational costs. The expenditure will be recognized as part of the 2018 cost recovery.

President & General Manager of TEPI Hardy Pramono added that the transfer of management is the most important thing at this time. The goal is to prevent a drastic decline in oil and gas production. The point is how to keep decline to a minimum. Six wells were drilled for 2017 and 19 wells were drilled for Pertamina.

Bisnis Indonesia, Page-15, Wednesday, Oct 26, 2016

Regulatory Reform Needs, Accelerate Oil and Gas Infrastructure

According to an economic observer from Airlangga University, Dr. Nafik HR, the current government must reform its economic policies which are still using a neoliberal paradigm by replacing them with economic policies that are in favor of the people's and national interests and of course constitutional.

Let's just say frankly that the abundant natural wealth so far has been managed by foreign parties, and it is very profitable for them. Therefore, this is what must be taken over to become fully national control.

Then protect the control and development as well as the use of alternative energy such as geothermal, hydropower, solar power, and others that are still very potent. Later it can be managed by state companies such as Pertamina or other national private companies, to help the Indonesian government reduce national imports and in order to increase the production of domestic energy resources and consumption.

Of course, to manage this abundant oil and gas sector and alternative energy, Pertamina needs full support, especially regulations from the government, because so far it turns out that, in terms of managing oil and gas resources, Pertamina is not given the main authority and especially when compared to foreign companies such as Petronas (Malaysia). ), Shell (Netherlands), Chevron (USA), Total (France), ConocoPhillips (USA), ExxonMobil (USA), CNOOC (China), ENI (Italy), KUFPEC (Kuwait), British Petroleum (UK), and so. Just look at how the Regulation of the Minister of Energy and Mineral Resources Number 15 of 2015 is actually very detrimental to Pertamina.

So that whenever this country is declared to exist, the hope that this nation will have energy independence will definitely not be realized. The government's mistakes in the past in managing our natural wealth should be used as a lesson so that in the future it will be returned again for the prosperity of the people.

A legal observer from the University of Muhammadiyah Surabaya (UMS) Umar Sholahudin assessed that regulation is still seen as one of the homework that must be done in national development planning. Umar admits that there are many overlapping, multi-interpreted, disharmony, or inconsistent laws and regulations, all of which actually disturb the investment climate or economic growth, for example, there are regulations governing the same sector but with different mechanisms.

Not a single state institution knows the exact number of laws and regulations issued by the central government and local governments. It means that the government, and the House of Representatives (DPR), are not serious about reforming regulations. The Minister of Energy and Mineral Resources Regulation No. 15/2015 on the management of Oil and Gas working areas whose contract period will expire is very clearly detrimental to Pertamina as a state company.

This ministerial regulation considers Pertamina to be the same as other oil and gas companies when it wants to take over the management of the oil and gas Working Area (WK) which will expire. The full authority of the Ministry of Energy and Mineral Resources to choose/determine which companies will be granted oil and gas management concessions will undermine Pertamina's important role.

In fact, the ministerial regulation has clearly stated that the government does not at all give guarantees to Pertamina to control the concession of the oil and gas working area which will expire, even though there has been a Government Regulation of the Republic of Indonesia Number 35 of 2004 which favors the national interest in terms of controlling national oil and gas resources.

In short, Pertamina must be more empowered, play a dynamic role in obtaining full concessions or the holder of all concessions for all projects at the forefront of the oil and gas and energy sectors so that they have a major impact on Pertamina's progress, and can choose partners if necessary.

In the 2015-2019 National Medium-Term Development Plan (RPJMN) stipulated by Presidential Regulation No. 2 of 2015, energy security is described as to the extent to which energy can be provided in a timely manner and with guaranteed availability, affordable prices, and acceptable quality.

The indicators are the amount of energy, the availability of infrastructure, the price of energy, the quality of energy, as well as the energy portfolio or mix. Energy security also has an element of sustainability so its management must pay attention to the carrying capacity of the environment. According to Dwi Sutjipto, the government is serious about realizing energy independence, as evidenced by the acceleration in the development of energy infrastructure projects.

Various regulations stimulate the development of energy sources at a time when there is a lack of discovery of national oil and gas reserves and fluctuations in world oil prices. The acceleration of energy infrastructure is the main key to creating energy independence now and in the future.

According to Dwi Sutjipto, Pertamina has become the backbone of national energy fulfillment. Not only contributing to the production of energy sources in the form of oil and natural gas which contribute as foreign exchange for the country, Pertamina also has the task of providing and distributing the ever-increasing supply of fuel oil (BBM) and gas.

Pertamina's Vice President of Corporate Communication Wianda Pusponegoro explained as a national oil company (NOC) Pertamina has the responsibility to ensure that energy supply is always in a safe condition for national energy security, under any circumstances. In order for this to be realized, Pertamina has launched 5 strategic priorities, namely, the development of the upstream sector, efficiency in all lines, increasing the capacity of refineries and petrochemicals, developing infrastructure and marketing, and improving the financial structure.

Wianda Puponegoro

According to Wianda, the five strategic priorities are implemented through various innovations. Pertamina's innovations include ensuring that all projects to support energy independence continue. Such as refinery development projects and the construction of new refineries, as well as the development of marketing infrastructure continues according to the established roadmap. International business development is a critical factor for Pertamina to develop into an international class company and to support the realization of national energy security.

Bhirawa, Page-4, Wednesday, Oct 26, 2016