Indonesia’s Pertamina targets stakes in two Iranian oil, gas blocks

Indonesia’s state-owned Pertamina will sign a memorandum of understanding with the National Iranian Oil Co. next month to develop oil and gas blocks in Iran.

Under the initial agreement, Pertamina will be allowed access to data on four Iranian oil blocks, a senior company official said Friday.

“There are two to four blocks that will be evaluated based on the initial study. Of the four, there are two blocks that will be our priority,” Syamsu Alam, Pertamina’s upstream director, said.

Pertamina expects to get an additional production of 30,000 b/d from each block if it is allowed to acquire the blocks, Alam said.

Indonesia and Iran have recently intensified efforts to cooperate. Pertamina and NIOC recently signed a heads of agreement for the latter to supply refrigerated LPG to the former. Pertamina is also planning to import a 1-million-barrel cargo of Iran Light crude oil in the third quarter of this year to test the grade at its 348,000 b/d Cilacap refinery in Central Java

Pertamina has allocated a capital expenditure of $5.31 billion this year, of which 72% is for upstream business. The company plans to spend $2 billion on upstream mergers and acquisitions this year.

The state-owned company’s overseas blocks produced 83,000 b/d in May 2016 compared with 75,000 b/d in May last year. The increase mainly came from the company’s 10% stake in the West Qurna block in Iraq.

Pertamina has three producing oil and gas blocks located in Malaysia, Algeria and Iraq.

The company produced 306,250 b/d of crude in Q1 2016, up 14.5% year on year. Gas production rose by 22.2% year on year in Q1 this year to 1.98 Bcf/day, Alam said. The company is targeting production of 327,000 b/d of crude and condensate and 1.926 Bcf/d of gas in 2016. The figure is equal to 659,000 b/d of oil equivalent, up 10% year on year.

With limited options domestically, the company is looking at growing its production via acquisition of overseas blocks. It is in advanced talks with Russia’s Rosneft to take a stake of about 10%-15% in two oil gas blocks in Russia. The company is aiming to get 35,000 b/d of production and 200 million barrels of reserves from those blocks.