Pertamina fails to clear environmental hurdles

The development of some 16 oil and gas blocks owned by Indonesia’s state-run PT Pertamina has been postponed due to the company's failure to obtain recommendation from the environmental office.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 11 -- The development of some 16 oil and gas blocks owned by Indonesia’s state-run PT Pertamina has been postponed due to the company's failure to obtain recommendation from the environmental office.

The Energy and Mineral Resources Ministry could not issue the necessary permits for the development of the 16 oil and gas blocks because a recommendation from the environmental office had not been obtained.

"Eight of the required licenses have been proposed since 2008 but have not been issued so far," said Sahala Lumbangaol, the state-owned Enterprises Ministry's deputy for mining and strategic industries, energy, and telecommunications.

Meanwhile, the Indonesian government drafted a regulation that would grant Pertamina the right of first refusal for oil and gas blocks when their existing contracts expire.

According to Edi Hermantoro, director of upstream oil and gas at the Ministry of Energy and Mineral Resources, Pertamina prior to any decision to extend the contract with the existing operator would have the chance to submit a proposal to develop the block, which would then be evaluated by a government-formed team.

Under the proposed regulations, the government would earn 85% of production revenue from a block compared with the present 60%. The final draft of the new regulations is said to be awaiting the approval of Energy Minister Darwin Saleh.

Analyst BMI said the regulations will be “worrisome” for foreign investors hoping for long-term returns on their investments, while “there are some doubts as to whether Pertamina's increasing upstream influence at the expense of IOCs will improve Indonesia's ability to efficiently exploit its resource base.”

Contact Eric Watkins at hippalus@yahoo.com.

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