Freeport negotiation is very hard bro, it takes many year before they eventually let go majority of the shares. It is because the previous contract is likely to be made under kick back scheme. Our oil and gas industry has much better scheme since all of the foreign oil company which drill oil in Indonesia must let go their oil field if Indonesian government wants to after some 20 years period (depending on each oil and gas field, oil and gas field with requires a lot of investment will take longer period to be taken over)
This is why all of rich oil field in Indonesia have already been in the hand of Indonesian state owned oil company (100 % Gov share), like Mahakam Block and Rokan Block. If we are not under democracy, maybe they will still be able to continue the contract. We take over that oil and gas field and even all of the equipment and asset in the oil field without paying any penny.
You guys definitaly should examine CPEC term......
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State-owned energy giant Pertamina has taken over Indonesia’s largest gas block Mahakam from France’s Total E&P Indonesie and Japan’s Inpex Corporation, with a pledge to curb its declining production rate in the future.
www.thejakartapost.com
The Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) and PT Chevron Pacific Indonesia have signed the Head of Agreement (HoA) for the Transition of Rokan Work Area today (29/9).
www.idnfinancials.com
Well... to be fair, I don't really think this is just due to us now being a democracy... but more like the government is now enforcing it's own regulations more seriously... and cracking down on possible corruptions in the process (which other forms of government can also do the same if they choose to).
Anyway, the way I see it there are actually 2 main reasons why we were able to acquire the above oil and gas blocks relatively easily at the end of their contracts compared to the Freeport saga.
1.
Both blocks were old mature fields already past their peak, production has been in decline since about the late 90's and requires significant investment to increase (or simply to hold the decline of) production... With the current global oversupply of oil & gas, prices has been low and the current block holders are not too keen in investing too heavily in these old fields anymore.
2.
Pertamina did outbid both previous block holders when submitting their bid for the future development and investment plans in those 2 blocks to the regulators, promising billions of $$ to continue developing the fields. Had the previous block owners submitted a better bid to the regulators, they might've won and kept the block, however due to point 1 above they did not. At the same time Pertamina was under pressure from the gov to acquire those blocks and thus put a serious bid to ensure their victory in the bid... Which they did...
So it might be true that we (or precisely the gov) didn't spend a penny to acquire those blocks, but Pertamina will now have to spend billions of $$ to continue maintaining and developing those old blocks. Whether their investment will pay off or not, is something we need to see as those are old, declining blocks...
I personally prefer that Pertamina invest in increasing their refining capacity by building new refineries or upgrading existing ones instead of buying up old oil blocks. Our refining industry is still very lacking in capacity (only about 60% of our needs), while crude oil & gas is cheap these days. Refined oil products has a much higher value and is less susceptible to crude oil price fluctuations, thus better economically for us.
Freeport on the other hand is still very keen on keeping the Grasberg mine in Papua, as it constitutes a huge percentage of their earnings and thus fought tooth and nail to be able to not only keep it, but also to extend it till at least the 2040's... Unfortunately Freeport is stingy and keeps on holding back in building their smelters as required by regulations... and after years of negotiations, the gov finally loses their patience and forced Freeport to divest 51% of their shares... but even so Freeport today still remains the main operator of the Grasberg mines and is responsible for the daily activities there..
