TEMPO.CO, Jakarta - Pertamina's capacity to manage East Kalimantan's Mahakam block oil and gas fields should not be doubted. But, in view of the very extensive scale of operations there, asking this state-owned oil company to carry out all the exploration and exploitation by itself does not make sense. That is why Pertamina's partner has become a crucial issue.
Pertamina, which the government will appoint to take over the Mahakam block after Total E&P Indonesie's (and Inpex Corporation's) contract ends in 2017, has yet to produce its work plan. To be sure, the government's decision on the Mahakam block is not yet final. Discussions with Total on the transition period have yet to take place, even though the government has pushed Pertamina to speed it up. Nevertheless, Pertamina has demonstrated its capability with the Offshore North West Java block (ONWJ) and the West Madura Offshore block.
When it took over ONWJ from BP and West Madura from Kodeco, Pertamina managed to raise their daily production. The ONWJ, which produced 19,000 barrels of oil a day in 2009, now yields 40,000. The West Madura block has virtually doubled production to 20,000 barrels from 11,000 in 2011. The key to this success was the decision to retain the existing workforce.
Situated on the Mahakam River delta, the Mahakam block presents a more complicated challenge: the capacity to simultaneously manage well locations that are both onshore and offshore. Adding to this complexity, hundreds of coal barges from East Kalimantan's mines almost never stop traversing the area. All this traffic could potentially cause disruptions on the shipping lane.
Total, which has a workforce of 20,000, including its contract employees, has so far managed to cope with these difficulties. Pertamina should make use of this workforce, 97 percent of whom are Indonesians. How this is to be achieved will depend on discussions with Total.
The enormous scale of operations means Pertamina will have to invest an enormous amount in the project. The Upstream Oil and Gas regulatory special task force (SKK Migas) calculates the cost will be US$2.97 billion, comprising 80 percent of Pertamina's total exploration and exploitation budget for this year. But given the opportunities presented and the reality of Mahakam block oilfields already producing, funding should not be hard to get.
The most difficult challenge will be how to keep the rent-seekers out. With its remaining oil and gas reserves in 2017 estimated to be worth at least Rp1,000 trillion, the block's prospects are too good to ignore. Several oil and gas shelf companies that usually get their money through political connections or bribing are sure to try their utmost to get their share, including piggybacking on any other company that may be chosen as Pertamina's partner.
To ensure that the Mahakam block operations will fully benefit the state, any cracks that allow rent-seekers the freedom to maneuver must be closed off. They will all interfere with Pertamina's opportunity to become a world-class company, as the Mahakam block becomes better-managed. Striving for transparency at all levels is one step that can be taken, including by Pertamina in its efforts to select the right partner. (*)
