Indonesia’s state-owned energy company, Pertamina, expects to sign a production-sharing contract for the Rokan oil block in January, after paying a $784 million signature bonus for its bid in December, a company director said.

Indonesia’s energy ministry announced in July that Pertamina will take over operation of Rokan, the country’s second-biggest oilfield block, once Chevron’s operating contract there expires in 2021.

The Rokan Block occupies 6,000 sq km (2,300 sq miles) on the Indonesian island of Sumatra. It contains 96 oil fields and has been a focus area for Chevron, but a proposal by the U.S. oil major earlier in 2018 for an extension of its Rokan contract beyond 2021 came in far below Pertamina’s offer.

Pertamina has formed a subsidiary named Pertamina Hulu Rokan that will take over operations from Chevron Corp. unit Chevron Pacific Indonesia in 2021, Pertamina upstream director Dharmawan Samsu told reporters on Jan. 17.

Pertamina is in discussions with Chevron on the transition and hopes to start drilling in Rokan this year, Samsu said.

The company has been “directed to seek a partner” for Rokan by the state-owned enterprises ministry, he said without elaborating.

Pertamina will open a tender this year to install new pipelines to transport crude from Rokan, as existing pipelines were already 40 years old, and had decided to begin work immediately, Samsu said.

“If we wait until 2021 to replace them, building pipelines takes two years or 18 months, so there would be a period where we’d face high risks that those pipes may not function because they need maintenance.”

Rokan oil output slipped 6 percent in 2018 to 209,400 barrels per day (bbl/d), from 223,000 bbl/d in 2017.

Pertamina, which expects production from Rokan to reduce its crude oil import needs by around one-quarter, has been pushed by the government to take over expiring oil contracts to increase its output, a policy that has stoked concern among foreign energy investors about the security of their projects.

The change in operatorship is anticipated to also result in a reduction of Indonesia's crude exports, as more crude from Rokan is absorbed in domestic refineries.

“Chevron Pacific Indonesia regularly engages with Pertamina,” Cameron Van Ast, a spokesperson for Chevron Asia Pacific, told Reuters by email, declining to provide further detail on the Rokan discussions due to company policy.

Onshore