Nonconventional Oil and Gas Block Contract Extension will be limited

KATADATA - The government will limit the contract extension of nonconventional oil and gas block. Later on, contractors can only extend their contracts once.

Energy and Mineral Resources (EMR) Ministry’s Oil and Gas Director I.G.N. Wiratmaja Puja said that the limitation over contract extension of nonconventional gas blocks would be included in the EMR Ministerial Regulation regarding the nonconventional oil and gas business. The condition is a follow up from the Government Regulation (PP) No. 35 Year 2004 about the upstream oil and gas business activities.

In PP 35/2004 article 28, it is mentioned that the oil and gas cooperation contract can be extended for 20 years by the longest for every extension made. There are no conditions or rules as to how many times the extension can be made. 

“Later on in the ministerial regulation, there will be limitation of 1 x 20 years,” Wiratmaja said in Parliament Building, Jakarta, several times ago.

One of the reasons for EMR Ministry to limit the extension is because of economic consideration. The government needs to consider the profit that the state would get from the exploitation of natural resources. 

The EMR Ministry’s data mentioned that the nonconventional potential is actually larger than the conventional one. The shale gas in Indonesia is predicted to reach 574 trillion cubic feet (TCF), while the potential of CBM (Coal Bed Methane) reaches 453 TCF. This potential is much higher than conventional gas, which only stands at 153 TCF. 

And so, after the extension contract ends, the oil and gas blocks need to be returned to the state. And afterwards, the government would decide what would the next move be regarding the oil and gas block.

“If we refer to the Ministerial Regulation Bo. 15 Year 2015 about contract extension, if the contract is expired, then the block can be given to PT Pertamina (Persero). If Pertamina does not want it, then it can be given to the existing contractor,” Wiratmaja said.

He also said that the meeting to discuss the regulation for the non-conventional oil and gas is already finished in the Oil and Gas Directorate General. Right now the regulation is being discussed in the EMR Ministry’s Law Bureau. If the legal discussion is completed, then the minister can sign it right away. The regulation would be used as the legal basis of the government when auctioning nonconventional oil and gas blocks.