Gas Output to Drop 5.7% Next Year at Indonesia’s Mahakam Block

Natural gas production from the Mahakam block, accounting for 30 percent of Indonesia’s gas output, may fall 5.7 percent next year and about one third by 2017 as the 46-year-old field ages, operator Total SA said.

The block may pump 1.66 billion cubic feet of gas a day in 2014, down from 1.76 billion cubic feet a day this year, Arividya Noviyanto, a vice president at Total E&P Indonesia, said in a Dec. 5 interview. Mahakam may export 166 cargoes of liquefied natural gas in 2014 via the Bontang plant this year, compared with 168 cargoes this year, Noviyanto said.

Total halted one project, which would have increased gas production at Mahakam, because of uncertainty about its ability to operate the field after its contract expires in 2017. Indonesia, the world’s third-largest LNG exporter, plans to produce more natural gas as its crude output declines and industrial consumption grows.

“It will become more and more difficult to justify investment pre-2017 for projects delivering production and revenues mostly post 2017,” Noviyanto said. “According to our current investment plan, production could be in the range of 1 billion to 1.2 billion cubic feet by 2017.”

Total and Japanese partner Inpex Corp. have proposed operating the block for another five years after their contract ends, reducing their stake after that, Total said on July 11. The partners will spend about $11 billion from 2013-2017 on Mahakan, including drilling new wells to slow the field’s decline, “provided that there is sufficient visibility to ensure continuity of investment, in particular over 2016-2017,” Noviyanto said.

Alternative Operator

The Mahakan block will have estimated gas reserve of 1.5 trillion cubic feet after 2017, he said. Started in 1967, it consists of Peciko, Tunu and Tambora gas fields as well as Bekapai and Handil oil fields, according to the company’s data.

An Indonesia government official said in November 2011 that PT Pertamina, the state oil and gas company, could also operate of the Mahakan block.

The Energy and Mineral Resources Ministry declined last month to extend a Chevron Corp. production-sharing deal for an Indonesian oil block, handing the contract to Pertamina, SKK Migas, Indonesia’s oil and gas regulator, said Nov. 28. The state company agreed to a 20-year LNG purchase agreement with Cheniere Energy this month, the nation’s first import deal.

Costs Rising

The country plans to produce 314 LNG cargoes this year, of which 29 are earmarked for domestic users, Widhyawan Prawiraatmadja, commercial deputy at SKK Migas, said on Nov. 14.

The country’s total gas output may peak in 2018 at 10,000 million standard cubic feet a day as new projects, including a third train at the Tangguh LNG plant, begin operation, the energy and mineral resources ministry said Nov. 18.

Mahakam’s liquid output including condensate may fall to 63,000 barrels a day next year from 66,000 a day this year, Noviyanto said. About 50 percent of LNG output from Bontang will go to domestic buyers, he said.

The block has contracts to supply 22 LNG cargoes to Jakarta’s floating receiving terminal and 400 million cubic feet a day through pipelines to other local buyers this year, Novitanto said.

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