Pertamina moves in on Kodeco, CNOOC

Indonesia's state-owned PT Pertamina, in line with the country's developing policy of resource nationalism, is vying with partner Kodeco Energy Ltd. to become the operator of the offshore Madura oil and gas block.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Oct. 17 -- Indonesia's state-owned PT Pertamina, in line with the country's developing policy of resource nationalism, is vying with partner Kodeco Energy Ltd. to become the operator of the offshore Madura oil and gas block.

Pertamina holds a 50% stake in the block, with the remaining 50% jointly controlled by Kodeco Energy and China's National Offshore Oil Corp. (CNOOC) each with a 25% stake.

The Indonesian firm's 50% share was deemed insufficient for the company to control the block's management, according to Pertamina corporate vice-president, upstream, Karen Agustiawan.

"It is true that we are the majority shareholder," Karen said. "The problem is the combination of Kodeco and CNOOC is also 50%, creating a possibility of deadlock, which is precisely the thing that we want to avoid."

With a bigger stake, Karen said, Pertamina plans to replace Kodeco as the block's operator. Kodeco had refused Pertamina's proposal for the block, which produces some 6,500 b/d of oil and 45 MMscfd of gas.

Kodeco shareholder representative Sung Sik Min said the South Korean firm is open for negotiation with Pertamina and CNOOC over the operatorship, and that the block's production-sharing contract—set to expire on May 6, 2011—had to be extended in any case.

According to Sung, the South Korean company plans to seek an extension of the West Madura PSC but "every time we invite Pertamina to discuss the issue, they choose not to come."

The looming contract extension date puts Kodeco and CNOOC in a weak bargaining position as Indonesian regulations require investors to return oil and gas blocks to the government after their rights expire.

Under those terms, Indonesia can either extend the Kodeco and CNOOC contracts or simply offer the block to Pertamina. In an effort to secure at least a share of the block, Kodeco and CNOOC might decide to accede to Pertamina's demand.

Pertamina's efforts to assume control of the Madura block follow attempts to obtain a larger interest in other oil and gas concessions, including Total's Mahakam Block in East Kalimantan, Inpex's offshore Masela Block in the Timor Sea, and Chevron Corp.'s deepwater fields off East Kalimantan.

"We want to have 20% stakes in Masela, Mahakam, and the deepwater areas," Karen said. "We have secured an approval from the government through the state-enterprises minister…he understands that we want to be 'the lord' in our own country," Karen said, underlining the resource nationalism behind the move.

Contact Eric Watkins at hippalus@yahoo.com.

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