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Indonesia Wants All Contractors To Sell Their Oil To State Firm Pertamina

oil rig

In its latest ‘resource nationalization’ push, Indonesia’s government is drafting a new regulation that will require all oil contractors to sell their crude oil production to state-held energy firm Pertamina.

Indonesia will publish the change in regulation “as soon as possible,” Reuters quoted energy ministry spokesman Agung Pribadi as saying on Tuesday. The move will be aimed at supporting the weakening local currency, the rupiah, and at cutting crude oil import requirements for the state oil company Pertamina, according to the ministry’s spokesman.

Chevron, ExxonMobil, and other oil contractors currently working in Indonesia, at present have production sharing deals under which they split the production with the government and are allowed to export their shares.

Indonesia is pushing for an ‘economic nationalization’ to have greater shares of oil and gas fields and to get more revenues from its natural resources, often by not renewing contracts with foreign oil firms after their expiry date.  

Earlier this year, the Indonesian government moved to reclaim its prolific Rokan oil block from Chevron in 2021 when its contract is set to expire. The government plans to turn the oil asset over to state-run Pertamina, according to a government official.

The latest block that Pertamina has reclaimed includes two of Indonesia’s largest oilfields, and adds to the worry that the state-run company has bitten off more than it can chew, with production already missing targets, and foreign majors refusing to accept the new fiscal terms being offered.

Chevron Pacific Indonesia is just the latest oil major casualty in Indonesia’s determination to nationalize its natural resources, including oil. Chevron is now joining the likes of Total, which was edged out of its Mahakam block earlier in 2018. Total jointly operated the block with Japan’s INPEX—a fifty-year collaboration that ended when its license expired in December 2017. Pertamina, who then took control of the block, offered Total and INPEX a production sharing contract, but Total declined the offer.

By Tsvetana Paraskova for Oilprice.com

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  • Rembrandt on August 15 2018 said:
    Dictators always kill the golden goose to get more eggs. Feeding the goose to get more geese never occurs to them.

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