Mahakam Block Leaves Little Reserves for the State to Exploit

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  • Blok Mahakam. TEMPO/Firman Hidayat

    Blok Mahakam. TEMPO/Firman Hidayat

    TEMPO.CO, Jakarta - The Mahakam block is the crown jewel of Indonesia's oil and gas sector, with the Kalimantan field touted to hold the country's biggest reserves. However, after 40 years of exploration, there are likely little reserves left for the country to manage and exploit once the block's operations fall into the hand of a local company.

    According to the Special Task Force for Upstream Oil and Gas (SKK Migas) said exploration activities conducted in 1967 discovered huge oil and gas reserves in the Mahakam block. In 1972, 2P reserves at the block amounted to 1.68 billion barrels of oil and 21.2 trillion cubic feet (TCF) of gas.

    In 1974, French oil contractor Total obtained the management contract for Bekapai Field, Mahakam Block's first oil and gas field. Massive depletion made Indonesia the largest liquefied natural gas (LNG) exporter in the world throughout 1980-2000. After being exploited for 40 years, the block now has 2P reserves amounting to 185 million barrels of oil and 5.7 TCF of gas.

    According to SKK Migas' estimation, by 2017—which is when Total's contract expires—Mahakam's remaining reserves will only amount to 131 million barrels of oil and 3.8 TCF of gas. The oil reserve that Indonesia will be left with is a mere 7.8 percent of the initial discovery, while the remaining gas reserve is just 17.9 percent.

    As of today, Mahakam contractors Total and Inpex have spent some US$27 billion investing on the block. Since the start of its exploration and development, the Mahakam block has contributed US$83 billion, or around Rp750 trillion in state revenues.

    In an interview with Tempo some time ago, former chief of the Executive Agency for Upstream Oil and Gas (BPH Migas), Raden Priyono, said Total's glory in the international oil business was because of its contract in the Mahakam block. Priyono assumes that the government at that time gave Total full control of the block due to the company's technological advances. "But for my generation, there is the question of why did we allow foreigners to run good block?"