Three legal frameworks are needed to facilitate Pertamina’s investment.
Rig Minyak

The government is currently preparing a regulation to allow state-owned oil and gas company Pertamina to invest in the Mahakam Block in 2017. With the new regulation, Pertamina will be able to invest in the oil and gas block before the current work contract expires.

The Energy and Mineral Resources (EMR) Ministry’s Director General for Oil and Gas I.G.N. Wiratmaja Puja said that three legal frameworks facilitate Pertamina’s investment. The first is a Regulation of the EMR Minister. The second is a Decree of the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), and the third, the agreement between Total E&P as the block’s operator and Pertamina, which expires in 2017.

“[The regulation] will be issued Tuesday next week,” Wiratmaja said at the EMR Ministry offices, Tuesday (23/8). (Read: SKK Migas Prepares Guideline for Pertamina’s Investment in Mahakam Block in 2017).

WIratmaja said that Pertamina must invest in the Mahakam Block in 2017 to prevent a drastic decline in production. Wiratmaja explained that making investments and carrying out operational activities in the oil and gas block would minimise any production decline.

Total’s Vice President of Corporate Communication, HR and Finance, Arividya Noviyanto, said that investment plans for the Mahakam block for 2017 are still being discussed with Pertamina. In general, Novi said that Total agrees with the plan.

The production capacity of the Mahakam Block is likely to decline naturally next year as the block continues to age, causing production costs to increase. (Read: Total Anticipates Mahakam Block Production Decline).

Novi added that despite decreased production capacity, the block would still be able to produce more than 1,400 million standard cubic feet per day (mmscfd). The production target in the block’s 2016 Work Programme and Budget(WP&B) 2016 is 1,423 mmscfd. In the revised 2016 WP&B 2016 revision, the SKK Migas increased the production target to 1,572 mmscfd.

The block currently produces 63,000 to 65,000 barrels per day of condensate. “Next year that will decrease a little due to natural causes,” Novi said, Tuesday (23/8).

To prevent a significant fall in production capacity, Pertamina has also started to draft plans for the block for 2017. The state energy firm has allocated US$1.5 billion, or around IDR 20 trillion. (Read: Pertamina Earmarks IDR 20 Trillion to Drill 19 Wells in Mahakam Block).

Pertamina CEO Dwi Soetjipto explained that these funds will be used by Total E&P Indonesie to drill 19 wells, including development wells, in the second quarter of 2017.