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NEWS UPDATES 2 October 2009

Indonesia: Energy regulator recommends extensions for four blocks

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Indonesia’s upstream oil and gas regulator BPMigas has officially recommended the government extend the contracts of four out of six oil and gas blocks currently waiting for contract extension approval, the Jakarta Post reported.

The four blocks are Block A in East Aceh, the Southeast Sumatra Extension block in South Sumatra, the Camar block in the East Java Sea, and the Madura BD field in East Java, BPMigas planning deputy Achmad Luthfi said Wednesday.

"BPMigas has submitted the recommendation to the Energy and Mineral Resources Ministry," Luthfi said.

"Now it's up to the government to decide."

One of the reasons for the recommendation was the fact that the four blocks had gone into the production stage, Luthfi said.

Block A and the Southeast Sumatra Extension block are operated by PT Medco E&P Indonesia. The contract for Block A will expire in 2011, while that for Southeast Sumatra Extension expires in 2013.

The government has repeatedly said the contract extension for Block A will be one of its priorities, as the block will supply gas to local fertilizer producer PT Pupuk Iskandar Muda.

The contracts for both the Madura BD field, operated by Canadian oil producer Husky Energy Inc., and the Camar block, operated by Camar Resources, will expire in 2010.

Beside the four blocks, there are another two awaiting contract extension approval: the Mahakam block, operated by Total E&P Indonesie, a unit of France's oil and gas giant Total SA, and the West Madura block, operated by South Korea's Kodeco Energy.

The contract for the Mahakam block will expire in 2017, while that for the West Madura block will expire in 2011.

Luthfi said BPMigas had not issued any decision about the contract extension request from the two blocks' operators because the regulator first wanted them to finish their acquisition negotiations with state oil and gas company PT Pertamina.

"They must reach an agreement first, then we will process the request," Luthfi said.

The Mahakam block is 50 percent owned by Total. Japan's Inpex owns the remainder.  Under existing regulations, part of the stake must be sold to domestic companies.

Pertamina is reportedly eyeing a 15 percent stake in the block. Pertamina is also sizing up bigger stakes in the West Madura block. It currently owns a 50 percent interest in the block. The remaining 50 percent is owned equally by Kodeco and China's National Offshore Oil Corp. (CNOOC).


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