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Indonesia: Fate of Mahakam block in Pertamina's hand

[JAKARTA] Indonesia says it plans to hand control over the Mahakam gas block to Pertamina once its current operator's contract, held by Total SA, expires in 2017, but details of a proposed partnership remain unclear.

Total's contract to operate the Mahakam block, Indonesia's single-largest source of natural gas, is one of numerous oil and gas contracts due to expire under uncertain terms, a stumbling block that the government of Southeast Asia's largest economy has promised to address quickly.

Indonesia is one of the world's biggest liquefied natural gas exporters, but with domestic output slipping and local demand growing the country has begun consuming more of its production and is seeking overseas supplies.

Questions have circled Pertamina's technical and financial capacity to operate the block, situated in East Kalimantan province, and maintain current production levels - around 1.7 billion cubic feed last year. "The government will give 100 per cent of the Mahakam block to Pertamina. The government will let Pertamina decide their partner by themselves," Energy Ministry Performance unit chief Widhyawan Prawiraatmadja told reporters on Friday. In response to the comments, one of Pertamina's directors said the firm is open to working in a partnership in the Mahakam. "This is in line with what Pertamina wants. Pertamina is open to working in partnership with others," Pertamina upstream director Syamsu Alam told Reuters via text message late on Friday. He stopped short of providing details on who the partnership would be with or how long it would last.

Earlier, Total proposed a five-year transition period in which it continues to operate the block in partnership, and has warned that output could decline sharply if a decision on future plans for the block are not made quickly.

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Last week another official at Indonesia's energy ministry said the regional administration in East Kalimantan may take a 10 per cent participating interest in the Mahakam block under the revised contract, which the government hopes to take a final decision in March.


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