Indonesia has agreed to extend the production-sharing contract for the Corridor natural gas block with ConocoPhillips, Spain’s Repsol SA and Pertamina, Deputy Energy Minister Arcandra Tahar said July 22.

The existing contract will expire in December 2023, and the ministry has agreed to extend the contract by 20 years to 2043.

ConocoPhillips will operate the block until 2026 before starting to transfer operatorship to state-owned Pertamina, Energy Minister Ignasius Jonan said, adding there was no set timeframe for the transfer.

“After a reasonable length of transitional period, ConocoPhillips will transfer [operatorship] to Pertamina,” he said.

Bijan Agarwal, president of ConocoPhillps Grissik Ltd., told reporters the arrangement was a “win-win” as the U.S. company would have been operating the block for 40 years by 2023.

The three years until 2026 will “make sure we have the continuity going through into the new production-sharing contract,” Agarwal said.

Nicke Widyawati, chief executive of Pertamina, said the transitional period would help Pertamina avoid the risk of a drop in production from the block during the transfer.

Corridor is Indonesia’s second largest gas producing block, with 827 million standard cubic feet per day (MMscf/d) of gas lifting in the first semester this year, according to upstream oil and gas regulator SKK Migas, higher than the 810 MMscf/d target.

Under the new contract, the contractors will have 53.5% of the gas produced from the block and 48.5% of the oil, Tahar said.

The government is aiming to sign the production-sharing contract, which will be under a gross split scheme, within a month, following payments of financial obligations to the government, Jonan said.

Under the new agreement, ConocoPhillips’ participating interest in the block will be cut to 46% from 54% currently. Pertamina’s interest will increase to 30% from 10% and Repsol will have a 24% interest in the block, said Tahar.

The shares will not change after ConocoPhillips transfers operatorship to Pertamina, Jonan said, but the contractors will be obliged to offer a combined 10% of participating interest in the block to a municipally-owned company.

Onshore