After a two-year transition period, Indonesian state-owned energy giant Pertamina has officially taken over the Rokan oil and gas block from US-based supermajor Chevron in a historical nationalisation of one of the Southeast Asian country’s most lucrative oil blocks.

Pertamina upstream subsidiary PT Pertamina Hulu Rokan (PHR) took over the block from Chevron’s local arm, PT Chevron Pacific Indonesia (CPI), on the night of August 8, marking the end of the US company’s 97-year reign over the Rokan Block located in Riau.

The Rokan Block is currently Indonesia’s second-most productive oil block after the Cepu Block but was, in its heyday, the country’s most productive oil site and the backbone of the country’s membership in the powerful Organisation of the Petroleum Exporting Countries (Opec).

During a livestream takeover ceremony on the night of August 8, Minister of Energy and Mineral Resources Arifin Tasrif said: “[This takeover] marks a historic milestone in Indonesia’s upstream oil and gas history. PT CPI has managed the block well, thus we hope PHR can continue [CPI’s] success in developing the block.”

Pertamina won operatorship rights over the Rokan Block in July 2018 after beating CPI at an auction. Pertamina inked a production sharing contract (PSC) with the government in May 2018, marking the beginning of the transition to be completed by the time CPI’s PSC expired this month.

Critics previously said the government’s handover of Rokan to Pertamina exemplified how Indonesia’s energy sector had been run according to a nationalistic agenda, particularly ahead of the 2019 presidential election, but then-energy minister Arcandra Tahar hit back saying that Pertamina had fairly won the block because it made a “much better” offer than CPI.

Upstream Oil and Gas Special Regulatory Taskforce (SKKMigas) head Dwi Soetjipto on August 8 said PHR aimed to raise block oil production to 165,000 barrels per day (bpd) by the end of this year.

The figure marks a 2.7 per cent increase from the block’s output of 160,646 barrels bpd as of June 30, which accounted for 24 per cent of the national output, ranking it second to the Cepu Block in East Java, according to SKKMigas data.

Dwi said: “We will ensure Rokan’s smooth takeover and maintain the level of oil production at the end of the CPI contract.”

The taskforce previously acknowledged that the transition might reduce oil production from the already aging block, which produced nearly one million bpd in 1973, a time when Indonesia was producing around 1.3 million bpd, an output sufficient for the Southeast Asian country to secure a trade surplus and a seat on Opec.

A further decline in the block’s output would be detrimental to the government’s goal of producing one million bpd by 2030 to attain energy security.

The block also produced 41 million standard cubic feet per day of gas as of June 30, which accounted for seven per cent of national output, the same SKKMigas data show.

SKKMigas and Chevron signed a heads of agreement (HoA) on the block’s handover on September 29. The regulator directly oversaw the transfer of manpower, power supply and technology, among nine aspects of the transition.

SKKMigas wrote in a statement on August 8 that CPI had drilled 103 development wells between the HoA-signing day and August 8 in maintaining production levels.

CPI managing director Albert Simanjuntak said in a statement: “We hope the Rokan Block can continue contributing to the state and the nation.”

Pertamina president director Nicke Widyawati said that Pertamina planned to invest $2 billion in developing the Rokan block until 2025.

The state-owned company is set to drill 161 new oil and gas wells by the end of this year and 500 new wells in 2022 to maintain production levels. The company has also formed a transition team to oversee production, finance and project and facility-engineering processes.

“We are committed to maintaining production of the Rokan block,” Nicke said, also on August 8.

PHR is slated to manage the block for 20 years. The company is also required to transfer 10 per cent control over the block to a region-owned enterprise as required by prevailing regulations.

Chevron’s role in the Rokan Block began in 1924 when the company, then called the Standard Oil Company of California (Socal), sent four geologists to study the area. The company discovered oil in the Duri field in 1941 and in the Minas field in 1944. It began production in 1951 and has cumulatively produced 11.69 billion barrels of oil.