By Deden Sudrajat and I Made Sentana
JAKARTA--Indonesia won't extend Chevron Corp. (CVX)'s contract
to produce crude oil at a small oil block in Central Sumatra and
will give the rights to state-owned oil and gas company PT
Pertamina, the country's energy minister said Thursday.
"After 50 years of being operated by Chevron, the contract won't
be extended [when it expires Wednesday]," Minister of Energy and
Mineral Resources Jero Wacik told reporters.
Mr. Wacik described the area as a "small block" but also said
that Indonesia is "prioritizing national interests" and Pertamina
is "capable" of operating the block.
The government has in the last two years introduced polices to
reduce foreign investor control over its natural resources ahead of
parliament elections in April and a presidential poll in June.
Pertamina will take over the block within the next six months,
Mr. Wacik said.
The onshore block, which is located in Riau, produces 4,000
barrels/day of crude oil, only a small portion of Chevron's 325,053
b/d total output in the country.
The minister said Pertamina will also take over the Kampar block
in Riau from Indonesia's largest privately owned energy company PT
Medco Energi Internasional (MEDC.JK). The block currently produces
3,000 b/d of crude oil.
Officials from Chevron and Medco weren't immediately available
for comment.
Bill Sullivan, a foreign advocate with Jakarta-based law firm
Christian Teo Purwono & Partner, said that the government's
decision was likely due to pressure to increase Indonesia's oil and
gas output at a time when Chevron and Medco weren't necessarily
fully committed to maximizing production from their respective
blocks.
"As Chevron and Medco are being treated in the same manner, it
is hard to say this is a case of economic or resource nationalism
given Medco is one of Indonesia's leading local oil producers," Mr.
Sullivan said.
Write to I Made Sentana at i-made.sentana@wsj.com