Ministers divided over Mahakam block

Amahl S. Azwar, The Jakarta Post, Jakarta | Headlines | Thu, April 04 2013, 9:13 AM

In the latest evidence of government fumbling on the future of the oil-and-gas rich Mahakam block, two senior ministers are disagreeing on the competence of Pertamina to handle the concession.

State-Owned Enterprises Minister Dahlan Iskan and Energy and Mineral Resources Minister Jero Wacik on Wednesday expressed different views when asked whether the state-owned oil and gas firm could handle Mahakam.

Dahlan said that he was certain Pertamina could manage the block after the production sharing contract (PSC) currently held by Total E&P Indonesie, the local subsidiary of France-based giant Total, expired in 2017. “I just want to express my stance. There have been many doubts over Pertamina’s competency to develop Mahakam and I want to set the record straight,” Dahlan said after meeting Pertamina’s board of directors.

Dahlan said that Pertamina had shown its capability in running the West Madura offshore block that it took over from South Korea’s Kodeco in 2011, citing that the block saw its first output increase in years to 13,600 barrels per day (bpd) of crude oil, up from a nadir of 6,000 bpd.

Pertamina also took over the North West Java Offshore block from British giant BP’s subsidiary BP West Java Ltd in 2009, boosting production to a current 36,000 bpd from 20,000 bpd in 2009, according to the minister.

“These two examples show that we can trust Pertamina with handling big assets such as Mahakam,” said Dahlan.

Meanwhile, Jero expressed a different opinion, telling reporters that he did not want to be “careless” in making a decision on Mahakam.

Jero, a confidant of President Susilo Bambang Yudhoyono, said that the final deadline for deciding on the concession was October 2014, which is also the end of the President’s final term in office.

“Imagine if Pertamina is granted operation of Mahakam. Will they be able to maintain the annual investment for the block? We have to consider so many things right now. Our minds have to be very clear so that we can make a level-headed decision,” Jero said.

Separately, Dahlan challenged Jero’s statement, saying that Pertamina’s current leadership under CEO Karen Agustiawan could maintain the investment level of the block to preserve production.

The dissension between the ministers was criticized by Indonesian Geologist Association (IAGI) advisory board member Andang Bachtiar, who said that the comments demonstrated that the government was not unified on the block.

“One person thinks business, while the other thinks about politics,” Andang said, without elaboration.

The government, according to Andang, should give the entire Mahakam concession to Pertamina, which he expected would find partners to operate the block to show that the company was “a leader in its homeland.”

“Pertamina in the end will likely choose Total to cooperate with anyway, given the business and technical factors,” Andang said.

Pertamina, the most bankable state-owned company in Indonesia, booked record-high net profits of Rp 25.89 trillion (US$2.67 billion) in 2012, up 18.4 percent from a year earlier.

The company has allocated US$6.77 billion for investment for 2013, 40 percent of which has been slated for upstream activities, including overseas assets acquisition. The figure for the firm’s capital expenditures in 2013 is higher than the 2011 figure of $2.4 billion and 2012 figure of $4.3 billion.

In comparison, both Total and Japan’s Inpex, which hold a 50 percent participating interest in the Mahakam block, have invested $2.5 billion to develop the fields — around 36 percent of Pertamina’s investment in 2013.


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