Indonesian authorities have rejected the extension of a Chevron oilfield contract, which will be handed over to state-owned oil company Pertamina, as the country moves towards curbing the influence of foreign oil companies on its territory.
Chevron has been operating the Siak oilfield in Sumatra for 50 years, producing about 4,000 barrels of oil per day. While the field represents only a fraction of the US giant’s production in Indonesia, the handover of the license to a state-run company could bode ill for investor sentiment going forward.
Chevron produces around 320,000 barrels of crude and 636 million cubic feet of natural gas per day in Indonesia, and the Siak oilfield is among 29 oil and gas contracts that are set to expire between now and 2021.
State-run Pertamina will resume control of the Siak block within six months.
"While Chevron is disappointed that the production sharing contract for the Siak block will not be extended, the company respects the decision," Chevron said in a statement.
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A revision of the country’s oil and gas policies is a key issue in the run-up to parliamentary election in April and presidential elections in June next year, while the current government has sought to reduce foreign investor control over the sector over the past two years.
While Indonesian authorities have said that they are “prioritizing national interests,” there has also been discussion of Chevron’s lack of commitment to maximizing production in smaller blocks, and that state-run Pertamina would have more motivation to fully develop these fields.
Pertamina and Thailand’s PTT Exploration & Production Plc (PTTEP) have also announced plans to acquire $1.3 billion in stakes in two offshore energy projects rom US-based Hess Corp. The JV will acquire a 75% stake in the Pangkah oilfield in the East Java Sea and a 23% stake in the Natuna Sea A gas field, which have combined reserves of about 319 million barrels of oil equivalent.
By. Joao Peixe of Oilprice.com