Pertamina Weighs Whether to Buy Exxon Participating Interest in Block 31

State-owned oil and gas company, PT Pertamina, is considering buying 25 percent participating interest in the Block 31 oil field in Angola from ExxonMobil Corp.

According to Bloomberg, Pertamina’s bidding price totaled US$ 3.5 billion, beating the bidding price of China Petrochemical Corp, also known as Sinopec Group.

Pertamina’s bidding price also topped the Indian-based Oil & Natural Gas Corp’s US$ 2 billion bidding price.

Although an official has confirmed Pertamina’s involvement in the bid, Pertamina refused to confirm its planned acquisition of the oil and gas field, which will start producing 150 thousand barrels per day in 2012.

The current participating holders of Block 31 are BP Exploration (Angola) Ltd, which owns 26.7 percent participating interest, Exxon (25 percent), StatOil (13.3 percent), Marathon Oil (10 percent), the Hong Kong-based China Sonangol International Holding Ltd (5 percent) and the National de Comustiveis de Angola, an Angolan state-owned company, controls 20 percent.

Pri Agung Rakhmanto, Executive Director of ReforMiner Institute, says Pertamina’s plan to buy the 25 percent participating interest from Exxon is not strategic, as the block is already in the exploration phase and Pertamina will not be the operator. The price is also too high as it is not productive yet.

Pertamina Should be Careful

Pertamina must be careful in acquiring oil and gas blocks overseas. This is a similar move in Vietnam, Libya and Australia, and it has failed before.

Last May 27, 2009, PT Pertamina Hulu Energi Australia, a subsidiary of PT Pertamina, bought 10 percent shares in Basker-Manta-Gummy Project from Roc Oil Company Limited for AUS$ 31.35 million.

In Indonesia, Pertamina and Exxon are currently cooperating to develop the Cepu Block located between Blora (Central Java) and Bojonegoro (East Java). Each company controls 45 percent participating interest. The government has selected Exxon to be Cepu Block’s operator. Cepu Block currently produces 20 thousand barrels per day, far below its production target of 160 thousand barrels per day.

Pertamina is currently the second largest oil producer in Indonesia, after PT Chevron Pacific Indonesia. In the first quarter, Pertamina production fell below its 200 thousand barrels per day target. Chevron produced 320 thousand barrels per day, below its target of 370 thousand barrels per day. Production declined due to unfavorable weather and also because some of the oil wells are too old.
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