Pertamina Seals Offshore North West Java Deal

State energy company is seeking to develop its upstream operations

Pertamina’s downstream energy business is being complemented by upstream growth. (JG Photo/Jurnasyanto Sukarno)

Pertamina’s downstream energy business is being complemented by upstream growth. (JG Photo/Jurnasyanto Sukarno)

Pertamina has boosted its interest in the Offshore North West Java block, buying a 5 percent stake in the oil and natural gas project from a US-based firm as part of the state energy company’s push toward the resource extraction business.

Achmad Zailani, a manager at Pertamina Hulu Energi ONWJ, the block operator, said the transaction to acquire a 5 percent interest in the block was completed on Thursday.

“Now the ownership structure in the block is 58 percent for PHE ONWJ, [Bakrie’s] Energi Mega Persada with 36 percent and Rico Energy with 5 percent,” Achmad said on Friday.

Pertamina purchased the participating interest from New York-listed Talisman Energy. The firm’s management refused to disclose the value of the transaction.

Achmad said the acquisition allowed Pertamina to increase its revenue and production shares from the ONWJ block, in line with the company’s aggressive move to expand its upstream business.

Pertamina’s first involvement in the block’s operation was in 2009, when it purchased a 46 percent participating interest from British energy giant BP for $280 million. Pertamina then added another 7.25 percent when it acquired Inpex Jawa in 2010.

The latest acquisition will add 10.7 million barrels of oil equivalent to Pertamina’s reserves.

Achmad said that output from ONWJ was 37,900 barrels of oil per day (bpd) in the first quarter this year, higher than the average 33,300 bpd in 2012. Natural gas output for the first quarter was 212 million standard cubic feet per day (mmscfd), an increase from last year’s average of 199 mmscfd.

Achmad said the block, which has been pumping oil since 1971, was benefiting from Pertamina’s program of revitalization.

But Pertamina is anticipating a sharp fall output in August and September as it repairs its platform. Oil production will stop and gas output will decrease by 70 percent from the platforms during the operation, Pertamina said.

The repairs will cost around $118 million. Pertamina has allotted more than $1 billion for capital expenditures at ONWJ this year.

Pertamina aims for oil output to average 36,400 bpd this year and natural gas production of 193 mmscfd, based on a PHE ONWJ work program and budget approved by regulator SKKMigas.

Pertamina plans to boost oil production by acquiring oil and gas blocks in the local and international markets. The Jakarta-based company has two acquisition deals in the pipeline.

Last year, it signed an agreement to acquire ConocoPhillips’ Algerian unit for $1.75 billion. The transaction, expected to be completed toward the middle of this year, will boost Pertamina’s reserves by 100 million barrels of oil and will increase annual production by about 23,000 bpd.

Pertamina has also signed an agreement to acquire the three Indonesian units of US firm Anadarko Offshore Holding Company. The assets of the three units are still in the exploration stage.

Pertamina has forecast its net income will climb 11 percent to $3.05 billion this year.