Indonesian government cast doubts on Mahakam block renewal

The Indonesian government may not extend Total E&P Indonesie's contract to operate an oil and gas block in the hydrocarbon-rich Mahakam Strait and neighboring coastal areas of East Kalimantan when it expires in 2017. The government might opt to offer the block to the national oil and gas company PT Pertamina instead.

Offshore staff

JAKARTA, Indonesia -- The Indonesian government may not extend Total E&P Indonesie's contract to operate an oil and gas block in the hydrocarbon-rich Mahakam Strait and neighboring coastal areas of East Kalimantan when it expires in 2017. The government might opt to offer the block to the national oil and gas company PT Pertamina instead.

The Energy and Mineral Resources Ministry Director General of Oil and Gas Luluk Sumiarso said such a decision would be in line with proposed amendments to the 2001 oil and gas law. The law mandates that Pertamina has the first option to take over the block once it is declared an open area on expiry of the usually 30-year production sharing contract.

If cash-strapped Pertamina should failed to finance the takeover, it would have the option to invite a private sector partner, including Total, to continue exploiting reserves.

Total has operated the Mahakam block since 1970 in a 50:50 partnership with Inpex of Japan.

Industry observers said any decision against Total would affect foreign investors' confidence in Indonesia's petroleum prospecting sector.

Total is the biggest investor in Indonesia, with current production of 2.6 MMcf/d of gas.

3/16/2007

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