Government moves to help oil firms<\/p>\n
Fitri Wulandari, The Jakarta Post, Jakarta<\/p>\n
The government is considering offering investors the
\nopportunity to conduct joint studies before they submit proposals
\nfor oil and gas concessions as part of the country's latest bid
\nto boost investment in the sector.<\/p>\n
Iin Arifin Takhyan, the director general of oil and gas at the
\nMinistry of Energy and Mineral Resources, said investors would be
\nallowed to conduct studies jointly with the ministry to assess
\nhydrocarbon reserves in the blocks they were interested in.<\/p>\n
\"When, based on the studies, they are sure about the block's
\nprospects, they can submit proposals to us to obtain the
\nconcession. First come, first served,\" Iin told reporters over
\nthe weekend.<\/p>\n
After the company submitted its proposal, the government would
\nplace a notice in the media inviting bids from other interested
\nparties in order to ensure transparency.<\/p>\n
If another firm was to offer a better price and terms to the
\ngovernment, the latter would give an opportunity to the firm that
\nhad conducted the study to improve its offer for the block.<\/p>\n
\"This will widen the opportunities (to acquire oil and gas
\nconcessions). The company that carries out the study will have
\nthe right to preempt (other bids),\" he said.<\/p>\n
The government and investor would jointly finance the cost of
\nthe study.<\/p>\n
Currently, investors bid for oil and gas blocks after studying
\nthe geological data provided by the government, which frequently
\nlacks detail and is sometimes inaccurate. They are not allowed to
\nconduct field studies before submitting their bids.<\/p>\n
The new policy, if adopted, would represent another move by
\nthe government to revive plummeting investment in the oil and gas
\nindustry.<\/p>\n
Such falling investment is worrisome, particularly given the
\nnatural decline in the country's oil reserves. Indonesia
\ncurrently produces around one billion barrels per day (bpd),
\nbelow its quota of 1.27 billion bpd set by the Organization of
\nPetroleum Exporting Countries (OPEC).<\/p>\n
The country's proven and possible oil reserves stand at around
\n10 billion barrels, which is enough to last around 20 years. To
\nprolong the life of its oil reserves, Indonesia will need new oil
\ndiscoveries.<\/p>\n
Prior to the crisis, the government awarded 28 oil and gas
\ncontracts in 1997. But since then the number has been declining,
\nwith only one contract signed in 2002.<\/p>\n
The sector started to pick up last year with the government
\nawarding a total of 15 contracts. The better-than-expected
\nresults were attributed to the government's moves to revamp the
\nprocedures for obtaining oil and gas concessions.<\/p>\n
For instance, the government has offered a higher production
\nshare to investors, particularly those willing to prospect for
\noil and gas in remote and deepwater areas.<\/p>\n
The government has also simplified the procedures for
\nobtaining acreages. Investors can now directly propose the
\nacreages they are interested in instead of having to wait for
\ntender announcements.<\/p>\n
Energy expert Kurtubi said the policy of allowing investors to
\nconduct joint studies with the government to measure hydrocarbon
\nreserves was a good way of attracting investors.<\/p>\n
\"The investors will gain accurate data on hydrocarbon reserves
\nbefore confirming its wish to invest in the bloc,\" Kurtubi told
\nThe Jakarta Post over the weekend.<\/p>\n
However, Kurtubi said the proposed new arrangements could
\nencourage practices detrimental to healthy competition.<\/p>\n
\"They could keep the information for themselves and not share
\nit with others. This would inflict losses on the others,\" he
\nsaid.<\/p>\n
The proposed arrangements also had the potential to result in
\nprivileged treatment for certain investors.<\/p>\n
\"The government should maintain its neutrality by affording
\nother companies the same opportunities to conduct studies and bid
\nfor blocks,\" he said.<\/p>\n
Kurtubi emphasized that it was more important for the
\ngovernment to address the current lack of legal certainty
\nplaguing the sector, which was due to the absence of government
\nregulations on the upstream and downstream sectors as required by
\nthe Oil and Gas Law (Law No. 22\/2001).<\/p>\n
\"Investors need legal certainty more than anything else,\" he
\nstressed.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/government-moves-to-help-oil-firms-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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