Pertamina Challenged to Maintain Production after Controlling Mahakam Block

JAKARTA ( – After operating and developing the Mahakam Block for around 50 years, Total Exploration & Production Indonesia (TEPI) finally handed over the operatorship right of Mahakam Block to Pertamina. Pertamina now officially becomes the operator of the aging and largest oil and gas block, Mahakam from Jan. 1, 2018.

The operatorship right of Total E&P Indonesie has expired on Dec. 31, 2017. The handover of operatorship right means that all of the employees of Mahakam Block are now under the responsibility of PT Pertamina Hulu Mahakam (PHM), a subsidiary of Pertamina Hulu Energi. PHE is in return is fully owned by Pertamina.

The handover of the operatorship right was carried out, after years of long and often heated debate in the public. Previously, Total E&P Indonesie and Inpex Corp each held 50% interest in the block.

Under the new production sharing contract scheme, Inpex has decided to pull out from Mahakam and will not be part in the new contract, while Total has been given green light to own 39% of participating interest in the Mahakam Block, up from 30% set previously. Should Total own 39% interest, PHM would then hold 51% interest in the block and the remaining 10% is owned by local government companies.

President and General Manager Total Exploration and Production Indonesie (TEPI), Arividya Noviyanto said at the handover ceremony that the handover of operatorship right has been an “emotional moment” for Total E&P Indonesie as well as all its Employees working in the Mahakam block.

He said although the handover is an emotional one, the board of management of Mahakam Block is happy as they have been preparing the transition at the maximum level. As many as 1,885 employees of TEPI or 98% of the employees working in the Mahakam Block have now become employees of PHM. The total employees of PHM in Mahakam Block now reached 1,919 people, since some employees of Pertamina have joined in.

The biggest challenge for PHM would certainly be boosting the block’s production, or at least maintain the current production level. Therefore, since last year, PHM has injected funds to conduct drilling up to 19 new wells. However, only 15 wells have been drilled.

Before the takeover, Mahakam Block contributed around 13% of gas production in Indonesia.

PHM has set a target to produce 42,010 barrels of oil in lifting and 916 million standard cubic feet of natural gas per day (MMSCFD) from the Mahakam block. To attain the target, Pertamina plans to invest US$1.7 billion in the block, which will be used to carry out explorations and exploitation of oil and gas in the block. PHM has so far drilled 14 wells. (*)

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