Rule on oil, gas contract extensions expected

Posted on May 1, 2012

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Rangga D. Fadillah, The Jakarta Post, Jakarta | Tue, 04/03/2012 11:26 AM
The Energy and Mineral Resources Ministry will issue a regulation on extending oil and gas contracts to provide concession holders with more legal certainty, an official says.

The spokesperson for upstream oil and gas regulator BPMigas, Gde Pradnyana, said on Monday that there were currently no clear regulations covering the conditions and procedures for contract extensions.

The 2001 Oil and Gas Law was unclear, Gde said, and only stipulated a maximum 30-year limit for oil and gas contracts that could be extended by a maximum of 20 years at the concession holder’s request.

“A clear regulation that explains conditions for the government to extend or terminate a contract is not available. There’s no reference for decision making,” Gde said over the telephone.

Meanwhile, Evita Herawati Legowo, the Energy and Mineral Resources Ministry’s director general for oil and gas, said that such a regulation had been drafted under former minister Darwin Zahedy Saleh.

“However, due to several problems, it has not been enacted,” she said in a press statement available on the Oil and Gas Directorate General’s website.

“We hope the regulation can be issued this year,” she said in the statement.

The regulation would provide detailed procedures for contract extensions and provide criteria for extending or terminating contracts, Eva said. It would also give state oil and gas company Pertamina an option to take over expiring contracts.

According to BPMigas, contracts for 11 blocks will expire between 2013 and 2018: Siak, operated by Chevron Pacific Indonesia, expiring in 2013; Salawati, operated by Intermega Sabaku, in 2015; Corridor, operated by ConocoPhillips Indonesia, in 2016; Kepala Burung, operated by PetroChina, in 2016; Mahakam, operated by Total EP Indonesie, in 2017 and Arun B, operated by ExxonMobil, in 2017.

The remaining blocks are Attaka, operated by Chevron Indonesia Company, in 2017; South Natuna Sea B, operated by ConocoPhillips Indonesia, in 2017; Tuban, operated by PetroChina, in February 2018; Sanga-sanga, operated by Vico Indonesia, in 2018 and South East Sumatra (SES), operated by CNOOC SES, in 2018.

Total, for instance, has operated the Mahakam block since March 31, 1967. Its contract ended in 1997 and was extended for 20 years until 2017.

Separately, Pertamina spokesperson Mochamad Harun said the company wanted the option to operate expiring blocks.

“If a shareholder of a block wants to sell its interest, we also hope the government can offer it first to Pertamina. That policy is also implemented in many countries to develop their national oil companies,” he told The Jakarta Post.

Posted in: Energi