Indonesia to renegotiate Total's Mahakam contract

Jan. 24, 2007
Indonesian Energy Minister Purnomo Yusgiantoro has instructed officials to prepare to negotiate for better terms for the government when the contract for the Mahakam block off Borneo expires in 2017.

Eric Watkins
Senior Correspondent

LOS ANGELES, Jan. 24 -- Indonesian Energy Minister Purnomo Yusgiantoro has instructed officials to prepare to negotiate for better terms for the government when the contract for the Mahakam block off Borneo expires in 2017. Total E&P Indonesie operates the block on behalf of 50-50 Japanese partner Inpex Corp.

Industry sources said disagreement between Total and the government will likely surround the determination of how much gas should be reserved for the domestic market. Indonesia last week said it wanted at least 40% of gas contracts reserved for the domestic market as it seeks to reduce its dependence on costly imported oil.

Total Indonesie spokesman Ananda Idris, however, said 92% of Mahakam's gas is exported, and there is no reason to change that.

Total operated more than 2.6 bcfd of gas production from the Mahakam block in first half 2006 and said it expects the block's output to remain at that level through the early years of the next decade at least.

Total announced plans to invest $6 billion over the next 5 years on oil and gas exploration in the country, especially development of gas on Mahakam block (OGJ Online, Jan. 23, 2007).

Last November Total reported an offshore gas discovery between Tunu and Peciko fields on the block (OGJ, Nov. 20, 2006, Newsletter).

The Tunu Great South-1 well, drilled in very shallow water, encountered several gas reservoirs that confirm the extension of Tunu's southern zone, Total said. A production test will be conducted to confirm the find, and further wells will be drilled in the area to appraise its potential. The new resources could come on stream by 2009, Total said.

Contact Eric Watkins at [email protected].