The escalating Iran-Israel conflict has not only prompted many countries to issue travel warnings but also brought grim news for investment prospects in the oil-rich region, including oil and gas investment by State energy company PT Pertamina.
The open conflict between Iran and Israel is likely to prolong, potentially adding to the hurdles for Pertamina’s investment in the Iranian oil and gas region, besides the embargo issue by the United States.
In 2016, Pertamina signed a memorandum of understanding (MoU) with Iran to manage prospective blocks. Even during the two-day visit of Iranian President Seyyed Ebrahim Raisi to Indonesia on May 23-24, 2023, the MoU was revisited.
Two years after the field offer, Pertamina had allocated a budget of US$1.5 billion for the management of the Mansouri Block over a period of 5 years. However, the finalization of the acquisition plan had to be postponed due to the economic sanctions imposed by the United States on Iran in mid-2018.
“For Pertamina, this is certainly a very good step, especially if the previous MoU can continue because it will ultimately impact our lifting,” Pertamina’s Vice President for Corporate Communication, Fadjar Djoko Santoso, said.
The bilateral meeting between President Joko Widodo and Raisi resulted in 11 documents of cooperation agreements explored by both countries. Besides targeting an increase in trade volume to US$20 billion, the two countries also agreed to seek solutions for investments in the oil and gas sector.
Pertamina’s plans are still awaiting high-level discussions that are currently ongoing regarding the reacquisition plan for the block fields in Iran. Besides the Mansouri Block, the Iranian government through the National Iranian Oil Company (NIOC) also offered the Ab-Teymour Block to Pertamina at that time.
Based on Business records, the total reserves of the Ab-Teymour and Mansouri fields are estimated to reach 5 billion barrels. Both fields are in the production stage, with 48,000 barrels per day (bpd) for the Ab-Teymour Field and 54,000 bpd for the Mansouri Field. However, the company will focus only on Mansouri initially.
The investment value injected by Pertamina in Iran will be used for well improvements and drilling additional wells. The Mansouri Block’s characteristics are already ready for production, so Pertamina does not need to start from scratch like exploration.
The contract with Pertamina there will be in the form of a service contract rather than a production-sharing contract (PSC). Therefore, the company will be paid according to the services provided.
With this contract scheme, Pertamina still doesn’t have detailed potential oil that can be brought to Indonesia. However, Pertamina can exchange service commissions with oil that has been produced. Moreover, the oil production in Iran also matches the crude oil products that can be produced by the company’s refinery. Therefore, Pertamina plans to bring oil from Iran when the company’s refinery development master plan (RDMP) is completed.
