By BEN OTTO and DEDEN SUDRAJAT
WSJ, Updated June 19, 2015 6:36 a.m. ET
Pertamina granted 70% control of field that accounts for a quarter of Indonesia’s gas output
JAKARTA, Indonesia—Indonesia will grant state-owned Pertamina 70% control of its giant Mahakam oil-gas field at the end of 2017, leaving France’s Total SA and Japan’s Inpex Corp., the longtime operator and investors in the project, the remaining 30% share.
Energy Minister Sudirman Said told reporters Friday there would be no more negotiations about the stakes decision. “So Total and Inpex will report this decision to their head offices,” he said.
But it wasn’t immediately clear how or whether Total and Inpex, which have run the project with 50-50 shares for more than 40 years, would share their stake. Total, the field’s operator, said it couldn’t comment until the decision had been considered by company executives. The company had been seeking a 35% stake alone, a proposal it made after it became clear that the government wouldn’t grant it an extension to continue running the field.
Inpex said it couldn’t comment on Pertamina’s 70% share because “we understand the situation is that we are still in talks.” The company has previously said it would accept whatever decision the government makes.
The administration of President Joko Widodo earlier this year said it would turn over the giant field off the east coast of Borneo to Pertamina when the government’s contract with Total and Inpex expires at the end of 2017. The government is exploring the same option with other expiring contracts.
Questions abound over whether Pertamina could handle the mammoth job of running Mahakam, which accounts for a quarter of Indonesia’s gas output and almost 10% of its oil flows. Pertamina is profitable, but carries heavy debt, is stretched thin with other projects and is seen lacking Total’s operational capacity in a complex field.
Pertamina chief executive Dwi Soetjipto reiterated Friday that the company had prepared $2.5 billion for annual exploration and other development activities, roughly what Total has said the project requires to stay near current levels of production. Total and Inpex have invested more than $30 billion in the project over the years, but output has been declining as the field ages.
Mahakam is forecast to continue producing oil and gas until 2032.
Mr. Said, the energy minister, also said the government will discuss giving part of Pertamina’s share to the regional government in Borneo.
—Mari Iwata in Tokyo contributed to this article