REPUBLIKA.CO.ID, JAKARTA -- A Letter of Intent (LOI) on the continuation of the management of the Mahakam Block in East Kalimantan after 2017 was signed on March 26, 2010.
The official website of the Ministry of Energy and Mineral Resources mentioned that the LOI was signed by the Directorate General of Oil and Gas, oil and gas regulator BP Migas, state-owned oil and gas company Pertamina, Total E&P Indonesie and Inpex Corporation.
According to the LOI, the Indonesian government has full authority to determine the new management of the Mahakam Block post 2017, among other clauses.
The Indonesian government will ensure that the new management of the Mahakam Block will supply gas to buyers after 2017.
In addition, the LOI states that the existing contractor is obliged to continue to invest for exploration and exploitation of the Mahakam Block.
The Indonesian government will also ensure the return of all investment costs of the existing contractor before December 31, 2017.
The return of all investment costs can be in the form of accelerated depreciation incentives through amendments of the contract on the Mahakam Block signed on October 22, 2010.
On Friday, June 19, the government announced that after 2017, the shares of the participating interests in the Mahakam Block will be 70 percent for Pertamina and the East Kalimantan provincial government-owned enterprise and 30 percent for Total and Inpex.
Earlier, Minister of Energy and Mineral Resources Sudirman Said had decided that the Mahakam Block contract with Total and Inpex will not be renewed.
Also, Pertamina was appointed as the new management of the Mahakam Block after the earlier contract ends on December 31, 2017.
On January 21, 2008, Total had proposed extending the contract to the minister, while Pertamina had expressed interest to manage the block on September 4, 2009.
In addition, on September 28, 2009, the East Kalimantan provincial administration had also expressed interest.
The Mahakam Block contract was first signed by Total and Inpex on October 6, 1966. It ended on March 30, 1997.
On January 11, 1997, the government had extended the contract for 20 years, which will expire on December 31, 2017.
Therefore, till 2017, Total and Inpex would have managed the Mahakam Block for 50 years.
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