* Total's contract to operate Mahakam expires in 2017
* Indonesia gives right to Pertamina to take over expiring
* Pertamina has sent 3 letters to Indonesia govt on Mahakam
By Fergus Jensen and Wilda Asmarini
JAKARTA, May 21 Indonesian national oil and gas
firm Pertamina said it is pushing the government to
gain control of the country's top gas producing field that is
currently operated by Total of France whose contract
is due to expire in 2017.
Indonesia only allows oil or gas firms to extend their
contracts once for up to 20 years, and gives Pertamina the right
to take over expiring contracts if it wants them.
Total has warned that output from the Mahakam field in East
Kalimantan, currently at around 1.66 billion cubic feet per day,
could drop sharply if it is not allowed to extend its current
contract beyond 2017.
Total has promised to invest up to $7.3 billion before then
if the contract is renewed, but energy resources are highly
politicized in Indonesia and with elections approaching in July
no decision has been made.
Pertamina, which plans to increase output nearly five-fold
by 2025, has written letters reminding the government it is
ready to take over the Mahakam field.
"We reaffirmed we are ready to operate it," Pertamina
upstream director Muhammad Husen told Reuters on the sidelines
of the annual Indonesia Petroleum Association (IPA) conference
in Jakarta, adding that his firm had sent three letters so far.
"Maybe the government needs time to consider it."
Husen declined to comment on the exact contents of the
letters or on how much Pertamina would spend on the field.
Total said it was aware of the letters, but was still
waiting for a response from the government to its latest
proposal on the Mahakam field that it submitted in July, 2013.
IPA president Lukman Mahfoedz urged the government to
produce a "clear and transparent" regulation on contract
extensions that takes into account the roles of Pertamina,
international oil companies and Indonesian oil and gas firms.
"We are waiting," Mahfoedz said, referring to the high risks
and lack of legal certainty energy investors face in Indonesia.
Over the next five years around 20 of Indonesia's
production-sharing contracts will expire, he said, accounting
for around 635,000 barrels of oil equivalent per day (boepd) in
2013, or 30 percent of Indonesia's total oil and gas output that
The government is preparing regulation that would simplify
its processing of expiring oil and gas contracts, Energy and
Mineral Resources Minister Jero Wacik told reporters.
"In this era of democracy when they want to extend one
contract the noise they make is extreme," Wacik said.
"Previously there wasn't very clear regulation," he said,
adding that the new rules would eliminate lengthy case-by-case
negotiations. However, Wacik did not say when the new regulation
would be ready.
Of the 20 contracts that are due to expire, around 10 have
requested extensions "and we are processing these", the chief of
Indonesia's oil and gas regulator (SKKMigas), Johannes
Widjonarko, told reporters adding that some would be handed to
Eni will likely be given a permit to continue
exploring a block it took over from Hess Corp in
Indonesia's East Timor, beyond a four-year limit, SKKMigas
commercial director Widhyawan Prawiraatmadja told reporters.
"I think a company like ENI doesn't have problem with their
commitments, so most likely we will give them more time for
exploration," Prawiraatmadja said.
In 2014 Indonesia budgeted oil and gas output to reach more
than 2.1 million boepd, although this figure is expected to be
revised down because of delays in developing ExxonMobil's
Cepu block in East Java.
(Editing by Muralikumar Anantharaman)