Mahakam Contract is hampered due to Production Sharing Portion

KATADATA - The discussion about Mahakam Block still occurs until now. This time, Energy and Mineral Resources (EMR) Ministry’s oil and gas director general I.G.N. Wiratmadja Puja said that the negotiation process includes terms and condition between the government and cooperation contract contractors (KKKS). The government is still unable to decide the portion of the production-sharing contract that will be received by the government and KKKS. 

The fact is that the contract of Mahakam Block will soon expire in 2017. The government has decided Pertamina to be the main operator with 60 percent holdings, while the local government of East Kalimantan will get 10 percent as a participating interest (PI). And the old operators of the block, Total E&P Indonesie and Inpex Corporation, will get 30 percent of holdings. According to Wiratmadja, the portion of production-sharing contract cannot be changed anymore.

Meanwhile, EMR Ministry’s upstream oil and gas business development director Djoko Siswanto said that until now Total and Inpex have not asked for the production-sharing portion yet. The negotiation is conducted more between the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas, the government’s agency to regulate upstream oil and gas business) and Pertamina. However, he admitted that he does not know about the portion that Pertamina had proposed. 

Djoko only predicted that the state-owned oil and gas giant can get a large production-sharing portion, which can reach 40 percent, and the government’s portion will be 60 percent. 

Previously, the contract discussion was hampered by asset valuation after the government gave 10 percent of PI to East Kalimantan local government. Back then, Widhyawan Prawiraatmadja, the head of the Energy Ministry’s performance controlling unit, said that there were two things that the government has not done yet before the finalization of Mahakam Block’s contract. 

First, SKK Migas was finishing the valuation of Mahakam Block asset. Second, the oil and gas director general was helped by SKK Migas to make the terms and condition of the contract. The asset valuation will use a third party so that the result will be independent and credible. This is needed because there were still different perspectives in terms of the asset valuation between Pertamina as the new operator and Total EP as well as Inpex.

The valuation was also needed to know the exact value of Mahakam’s assets. If the value is known, then Pertamina and partners can decide which payment schemes can be taken for the share ownerships of the block. 

According to Widhyawan, swap of assets is one of the payment schemes tat Total proposes. From the government’s side, it was recommended to use the swap scheme in order to add Pertamina’s assets abroad. But Pertamina considered that it is not necessary. Besides, there was also option to pay in cash.