Pertamina plans US$2b annual investment for Mahakam block

[JAKARTA] Indonesia's Pertamina would invest around US$2 billion annually into the Mahakam gas block if given control, and target output of 1.2 billion to 1.5 billion cubic feet of gas per day (bcfd), a senior official at the state-owned energy firm said.

The government plans to hand Pertamina control of the block once the contract of current operator, Total SA, expires in 2017.

Pertamina submitted its investment plan for the block to the government a week ago, and the authorities said a decision on its future would be made by the end of March. "Based on our evaluation, we can keep production of gas in Mahakam Block around 1.2-1.5 bcfd," Syamsu Alam, Pertamina's director of upstream operations, told Reuters by text message on Friday. "Investment - we estimate around US$2 billion per year." Analysts have questioned Pertamina's technical and financial capacity to operate Indonesia's single-largest source of natural gas, situated in East Kalimantan province, and maintain current production levels - around 1.7 bcfd last year.

Total's contract is one of numerous oil and gas contracts due to expire before the future of affected projects has been decided - a situation 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. With domestic output slipping and local demand growing, the country has begun consuming more of its production and is seeking overseas supplies.

REUTERS