June 19, 2023
JAKARTA – State-owned oil and gas giant Pertamina will make its first payment to take over Shell’s 35 percent participating interest in Maluku’s Masela oil and gas block, the Energy and Mineral Resources Ministry announced on Friday.
Minister Arifin Tasrif said Pertamina would pay half of the total price agreed to with Shell and that the process would be completed by the end of the month.
“It is like a down payment, a sign of [Pertamina’s] seriousness,” Arifin said in a press briefing on Friday.
He declined to say the total acquisition price.
Previously, the government had expressed frustration over what it said was Shell’s slow exit from the liquified natural gas (LNG) project, amid stiff negotiations over the sale of the British oil and gas firm’s participating interest.
Shell was estimated to be willing to let go of its interest for around US$1.4 billion, according to the National Energy Board (DEN) secretary general Djoko Siswanto, but other estimates were as high as $2 billion.
Research by Tenggara Strategics, a think tank affiliated with The Jakarta Post, put the fair price at between $800 million and $1 billion.
Pertamina expects to conclude the takeover through a consortium with Malaysian state-owned oil and gas giant Petronas, the ministry said on June 13.
If the purchase goes as planned, the consortium will develop the block alongside Japanese oil and gas giant Inpex, which holds the remaining 65 percent stake in the Masela bloc.
Asked about how Petronas and Pertamina would split the payment for the acquisition, Arifin said it would be settled by an agreement between the two companies.
“The most important thing is that if we already have the parties to take over Shell’s shares, [the parties] can start to meet with Inpex,” the minister said.
The minister added that the project had an offtake guarantee, with 60 percent of production to be sold for domestic use. The government would prioritize local buyers as the country would require gas from the block in the future, he said.
But commitments from domestic buyers were needed to make the project viable, Arifin noted.
“This huge project will need funding, and it needs a certainty that the loan can be repaid. Thus, it should ensure the source of the money, which is those buying contracts,” Arifin said.
Indonesia had 49.7 trillion cubic feet (tcf) of gas reserves in 2021, down more than 50 percent from the 100.4 tcf in 2019, according to US Energy Information Administration (EIA) data. Its reserves are the third largest in the Asia-Pacific region, after China and Australia.
Meanwhile, the country’s natural gas consumption is forecast to more than quadruple to 26,000 million standard cubic feet per day by 2050, Upstream Oil and Gas Special Regulatory Task Force (SKK Migas) data shows.