Total E&P Indonesie expects the giant Mahakam gas block's proven reserves to fall to 2.7-3 Tcf by 2017 and plunge further to 1.3-1.6 Tcf in 2018 due to natural depletion, a company official said Thursday.
"At the end of 2012, the remaining reserves and resources in the Mahakam PSC are estimated between 4 and 4.5 Tcf and approximately 50 million barrels of oil," Kristianto Hartadi, head of Total E&P Indonesie's media relations department, said. "The reserves are estimated to reach 1.3-1.6 Tcf in 2018, based on a depletion rate of 50% annually if Total does not do anything. We are trying to arrest the decline to 15% annually."
Previously, upstream regulator SKK Migas said that Mahakam's proven gas reserves could dwindle to 2 Tcf by 2017 and would require an investment of around Rupiah 80 trillion ($8.25 billion) to extend production until 2037. By 2017, the proven and probable reserves are expected to further decline to 131 million barrels of crude oil and 3.8 Tcf of gas, it added.
Mahakam, located offshore Kalimantan, is Indonesia's largest gas block and began producing in 1977. Total has a 50% operating interest in the block, with Japanese upstream company Inpex holding the other 50%. Their production sharing contract for the block is due to expire in 2017. More than 80% of the block's output is supplied to the nearby Bontang liquefaction plant and shipped overseas as LNG.
Total and Inpex have been seeking an extension of the PSC and have in the past said that this is crucial if they are to proceed with their investment plans. But negotiations with the government have dragged on mainly due to uncertainty surrounding Pertamina's role. The government is in discussions with Pertamina and Total over a stake for the state-owned company in the block and expects to make a decision by the end of this year.
Pertamina has proposed that it be given a 51% stake in the block and Total pay the government $500 million for a 49% interest if it wants to continue to develop it.
Total will spend $2.5 billion this year on the Mahakam block, up from $2.3 billion in 2012 as a mature block requires more investment, Hartadi said.
Total has a number of current and planned projects in the Mahakam block, which will help it maintain its current high level of production, but only till 2015, he added.
"We have two development projects currently, namely South Mahakam phase 3 that is expected to start up in the second half of 2015 and Peciko 7B that is expected to come on stream in 2014," he said. "After that, it will be difficult for us to develop more new fields in the Mahakam block."
Total will probably wait for the government's decision on the extension, as a new project requires at least three years to be developed and brought on stream due to the time taken for approval and preparation, he added.
Mahakam produced 1.79 Bcf/day of natural gas and 67,000 b/d of crude oil and condensates in 2012. In the first quarter of 2013, the company produced 1.78 Bcf/day, up 12.87% from its target of 1.577 Bcf/d. It also pumped 69,627 b/d of crude and condensates against its target of 67,990 b/d, Platts reported earlier.
