OREANDA-NEWS. March 26, 2013. Upstream oil and gas regulatory special task force SKKMigas has confirmed that state-owned firm PT Pertamina would be supplying fuel to an offshore block operated by China-based CNOOC.

SKKMigas head Rudi Rubiandini said on Monday that the Indonesian energy giant had signed a Rp 753 billion (USD77.5 million) contract to supply high-speed diesel (HSD) to support production activities at the block.

We support Pertaminas contract as it will boost the utility of local content in the nations upstream activities, Rudi said in a statement made available to The Jakarta Post.

The offshore Southeast Sumatra block, which covers an area of around 5,851 square kilometers near North Jakartas Thousand Islands regency, produces around 43,000 barrels per day (bpd) of crude oil and 150 million standard cubic feet per day (mmscfd) of natural gas.

Data from CNOOCs subsidiary, CNOOC SES Ltd., which operates the block, shows all the gas produced at the block is delivered to state-owned electricity firm PT Perusahaan Listrik Negaras (PLN) plant in Cilegon, Banten.

Currently, the block has 34 producing areas with 78 active offshore facilities as well as 58 platforms.

CNOOC SES Ltd. owns a 65 percent stake in the Southeast Sumatra offshore block. The firms partners at the block include state-owned Pertamina Hulu Energi Sumatra that owns 13 percent; South Koreas KNOC Sumatra (8.9 percent); British-based Salamander Energy (Sumatra BV) with 5 percent; Fortuna Resources Ltd. (Sunda) (3.76 percent); Talisman UK Ltd. (Southeast Sumatra) (2.08 percent); and Talisman Resources Ltd. (Bahamas) (1.6 percent).

SKKMigas is aiming for the local content utility rate of activities at the block to reach 98.64 percent with the delivery of the HSD, a type of industrial fuel mainly used to support upstream activities including rig use and oil and gas transportation.

Rudi added that SKKMigas was seeking to push the contractors to employ the banking services of either state-owned banks or regional administration-owned banks in funding the delivery contract.

Currently, he said, Pertamina owned the largest share of Indonesias upstream activities, reaping \\$12 billion from 2010 to 2012. In total, from 2010 to January this year, the service of state-owned companies in the procurement sector of upstream activities has reached Rp 24 trillion.

SKKMigas, formed as an interim replacement for erstwhile regulator BPMigas following a decision by the Constitutional Court last November to dissolve the latter, has been taking measures to promote the local content rule in the upstream industry.

The court deleted from the 2001 Oil and Gas Law several articles, which had formed the legal basis for the founding of BPMigas, following a judicial review filed by several organizations including Muhammadiyah, which deemed BPMigas as pro foreign interests and unconstitutional.

In 2009, BPMigas obliged oil and gas contractors to source 35 percent of their goods and services from the domestic market.

The domestic quota was raised in 2011 to 51 percent. Prior to the local-content rule, contractors spent an average of 20 percent of annual spending domestically.

Total annual expenditure in the oil and gas sector reaches between Rp 110 trillion and Rp 150 trillion.