The Indonesian government has moved to reclaim its prolific Rokan oil block from Chevron in 2021 when its contract is set to expire, it will then turn it over to state-run Pertamina, according to a government official.
Chevron Pacific Indonesia is just the latest oil major casualty in Indonesia’s determination to nationalize its natural resources, including oil. Chevron is now joining the likes of Total, which was edged out of its Mahakam block earlier this year. Total jointly operated the block with Japan’s INPEX—a fifty-year collaboration that ended when its license expired in December 2017. Pertamina, who then took control of the block, offered Total and INPEX a production sharing contract, but Total declined the offer.
Despite its push to nationalize its resources, Indonesia failed to hit its desired production and investment targets for oil and gas in H1 2018. The H1 investment target was $14.2 billion, but actual figures came in at just $3.9 billion, according to Indonesia’s upstream oil and gas regulator, SKKMigas, citing project delays.
The latest block that Pertamina has reclaimed includes two of Indonesia’s largest oilfields, and adds to the worry that the state-run company has bitten off more than it can chew, with production already missing targets, and foreign majors–such as Total–refusing to accept the new fiscal terms being offered.
Pertamina is unlikely to be able to go it alone without foreign investments, and foreign investments are hard to come by when control does not come with it.
Chevron has had a presence in Indonesia for almost a century, even longer than Total, but its plan for further development of the block paled in comparison to Pertamina’s, according to Indonesia’s energy and mines vice minister Arcandra Tahar, as cited by S&P Global Platts.
Indonesia, which was ranked in 2016 as the 99th least attractive mining investment environments in 2016 out of 104 nations, began its crusade to rail against foreign control of its natural resources years ago, sparked in part by Muslim civic organizations who have called for a constitutional jihad to challenge laws that enable foreign companies to control its resources, according to Reuters.