SKK Migas is finalising the letter of decision regarding Pertamina's investment in Mahakam next year.
KATADATA | Arief Kamaludin

State energy company Pertamina has begun to develop an investment plan to manage the Mahakam Block beginning next year. The company is allocating US$ 1.5 billion or some IDR 20 trillion to maintain the block's production before taking it over in 2018.

Pertamina President Director Dwi Soetjipto said the funds will be used to drill 19 oil wells, including development wells, in the second quarter next year, "This is to prevent a significant production decline in 2018," he said at the Maritime Affairs Ministry building on Tuesday (23/8). (Read:Total Agrees to Pertamina'sInvestment in Mahakam in 2017)

Dwi said the drilling of the 19 wells is expected to stem the decline in the block's production, given the block's mature age after producing for more than 50 years.

However, Pertamina needs to file a work plan and budget (WP&B) for the block's plan of development (PoD) in 2017. The drilling will be undertaken by Total E&P Indonesie, which will operate the block until the end of 2017.

The investment plans also require a legal umbrella because Pertamina will not be operating and managing Mahakam Block until 2018. Pertamina is now working with Acting Minister of Energy and Mineral Resources Luhut Binsar Panjaitan and the SKK Migas to issue the necessary regulations. "Hopefully they can be issued in a week or two," he said.

Meanwhile, SKK Migas deputy for business support control Rudianto Rimbono said they are finalising the letter of decision regarding Pertamina's investment in Mahakam next year. "We are making sure that everything is accurate," he told Katadata Tuesday. (Read: SKK Migas Prepares References for Pertamina's Investment in Mahakam)

Total's Vice President for Corporate Communication, HR and Finance Arividya Noviyanto said they are still discussing the 2017 investment plans with Pertamina. In principle, he said, Total agrees with the plan, especially since next year's production will likely be lower due to maturing fields and higher costs.

However, Novi said Mahakam can still produce more than 1,400 million standard cubic feet of gas per day (mmscfd). In the initial 2016 WP&B, Mahakam Block was targeted to produce 1,423 mmscfd. In the revised version of this year's WP&B, the SKK Migas raised the target to 1,572 mmscfd.

The block's current condensate output is between 63,000 and 65,000 barrels a day (bpd). "Next year it will be a bit lower due to natural decline," he said.

Novi said Total will strive to prevent Mahakam's output from declining significantly. One way is by continuing to drill wells. In Tunu Field for example, Total continues drilling to avoid the field losing up to45%-50% of its production. (Read:Total Offers Pertamina to Invest in Mahakam in Q2/2017)

By continuing to drill, production decline can be kept below15 percent. Next year, the drilling activity will not only focus on Tunu, but "…on all fields," Novi said.