The Indonesian government has drafted a regulation that would grant state-owned oil and gas company Pertamina the first shot at securing operating contracts for oil and gas blocks when their existing contracts expire. 

Edi Hermantoro, the director of upstream oil and gas at the Energy Ministry, said on Monday that under the new regulation Pertamina would get a chance to acquire the operating rights as they became available. 'Before we decide to extend the contract (with the existing operator), we will give Pertamina the opportunity to submit its proposal to develop the block,' he said. Evita Legowo, director general of oil and gas at the Energy Ministry, said the final draft of the new regulation was waiting for the approval of Energy Minister Darwin Saleh.

Pertamina has expressed an interest in 24 oil and gas blocks across the country whose contracts are due to expire over the next 10 years. It already has stakes in some of those blocks. Pertamina president director Karen Agustiawan on Thursday asked the government to allow Pertamina to take over the blocks as their contracts expire. She was speaking to the House of Representatives Commission VII, which oversees energy issues.

Sutisna Prawira, the head of law at the Energy Ministry, said the government would form a team to evaluate Pertamina’s plans for any block it was interested in. 'We will not automatically award the blocks to Pertamina,' he said. 'We will evaluate their proposal first.'

Under the new regulation, the government would take 85 percent of production revenue in any operating contract with Pertamina, an increase from 60 percent now. The standard government split in contracts with private operators is 85 percent.

Separately, Pertamina and Kodeco Energy have agreed on new ownership stakes in the West Madura oil and gas block, to take effect when the block’s licence is extended from May 2011. Bagus Setiardja, president director of Pertamina unit Pertamina Hulu Energi, said on Monday that Pertamina will increase its stake in the block to 60 percent, with Kodeco taking the rest. Currently, Pertamina has 50 percent, while South Korea-owned Kodeco and China National Offshore Oil Corp. each have 25 percent.

'The preliminary agreement with Kodeco has been reached,' Bagus said. 'But we’re still waiting for the new government regulation on the extension of contracts to be released.' The original joint operating agreement for the block expires in May 2011. The block produces 14,000 barrels of oil and 92 million standard cubic feet of gas per day.

Source: JakartaGlobe