OREANDA-NEWS. May 12, 2011. China-based CNOOC has pulled out from the West Madruda block following upstream oil and gas regulatory body BPMigas’ decision to pick state oil and gas company Pertamina as the operator of the oil block, a senior BPMigas official said.

BPMigas head R Priyono said the Chinese company had sent a letter to the agency to formally state its decision to withdraw from the oil and gas block.

“CNOOC is disappointed with Pertamina. The state company’s cooperation commitment in the block’s operation has changed from time to time. The last time, it requested 100 percent ownership of the block,” he said.

Priyono said CNOOC’s withdrawal might cause a decline in the block’s production, as the Chinese company was a well-known technological supporter for the current operator, Korea-based Kodeco Energy.

On Thursday, the government officially appointed Pertamina to replace Kodeco as the operator of the block in a 20-year-long contract.

In the renewed contract, Pertamina will have an 80 percent interest in the oil block, up from 50 percent in the previous contract, while Kodeco’s interest remained at 20 percent.

Kardaya Warnika, an expert staff member of the Energy and Mineral Resources Ministry, said the government appointed Pertamina to operate the oil and gas block because it believed that the company was capable of handling the offshore operations as it had with the Northwest Java offshore block.

“As mandated by the [oil and gas] law, the government intends to boost participation of national companies. We also see that Pertamina is capable of taking over the operation from Kodeco,” he told reporters after the new contract was signed.

The ownership of the oil block has gone through several changes. Prior to the new contract, Pertamina held a 50 percent stake in the block, while the four other partners — Kodeco, CNOOC, PT Sinergindo Citra Harapan and Pure Link Investment — each owned 12.5 percent stakes.

The presence of Sinergindo and Pure Link, which obtained ownership of the oil block only a few weeks before the end of the current contract, has sparked suspicions among observers.

The two companies bought the stakes of Kodeco and CNOOC in a transaction approved by BPMigas and the Energy and Mineral Resources Ministry on March 31. Before that date, Kodeco and CNOOC each owned 25 percent stakes in the block.

Both the ministry and BPMigas declined to comment on what the fate of the two companies would be in the new operation contract.

“The names of Sinergindo and Pure Link are not in the new contract,” Kardaya said. The composition of the ownership of the oil block is decided by the Energy and Mineral Resources Ministry.

Currently, the production of the West Madura offshore block is only 16,000 barrels of oil per day (bpd) and 187 million standard cubic feet per day (mmscfd) of natural gas.

Pertamina had previously said it was committed to allocating US\\\\$1 billion to finance the development of the block and increase its production.

The firm promised to boost production from 13,400 bpd to 25,800 bpd in 2012, 32,500 bpd in 2013, 37,200 bpd in 2014 and 40,500 bpd in 2015.