Indonesia may revise its oil and gas law to give state oil firm Pertamina first right to take over any blocks whose contracts are expiring, members of parliament said on Thursday, a move likely to upset foreign players.
Pertamina wants to expand its upstream activities to boost oil and gas production, and has identified several oil and gas fields that it wants to take over from foreign majors.
These include the Mahakam block, offshore of East Kalimantan, which is currently operated by Total's (TOTF.PA) Indonesian unit where the block contract is due to expire in 2017, and the Madura BD field in East Java, which is operated by Husky Energy Inc (HSE.TO) and China's CNOOC (0883.HK).
Pertamina's president director Karen Agustiawan previously said the company is still in discussions with Total over taking a stake of between 15-25 percent in Mahakam.
Indonesia's crude oil production, which was about 1.5 million barrels per day (bpd) in the 1990s, has almost halved and the country has become a net importer of crude oil in recent years. It produced 949,100 bpd of crude oil and condensate in 2009, missing a target of 960,000 bpd that year.
Major global resources firms such as Chevron (CVX.N), ConocoPhillips (COP.N) and Total operate in Indonesia, but the country has struggled to attract fresh investment and to develop new oil and gas fields, because of a combination of bureaucracy, increasing resource nationalism, and corruption.
However, Pertamina and several local players lack the financial resources to develop major projects.
Indonesia ratified the current oil and gas law in 2001 and revoked Pertamina's monopoly in the sector.
"The parliamentary commission has agreed to discuss a revision of the oil and gas law this year," Satya Yudha, a member of parliament for the Golkar Party, told Reuters.
"We want Pertamina's role in expired blocks to be clearly stated in the revision of the oil and gas law. However, we did not want Pertamina to monopolise the sector again," Yudha said, adding that the revision is also intended to attract investment in the oil and gas sector, and boost production.
Ownership and control of energy and mineral resources in Indonesia is politically sensitive, particularly when it involves foreign companies. Golkar's leader, tycoon Aburizal Bakrie, has extensive interests in the energy sector.
An energy ministry official, who declined to be identified, said previously that a target of producing 965,000 bpd of crude and condensate this year would be very difficult to achieve since output from older wells was falling about 10-15 percent per year.
Indonesia has offered new exploration rights and has said it will provide new incentives to oil and gas investors, including more favourable tax treatment and a better production split, in order to encourage exploration.
But industry insiders have said the incentives may not be sufficient, particularly since many of the unexplored fields are in remote locations and often in deep water, and so expensive to develop. (Reporting by Muklis Ali; Editing by Sara Webb)
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