Sat, 23 Aug 2003

Eight firms win oil and gas tender

Fitri Wulandari, The Jakarta Post, Jakarta

The government has announced eight winners of the tender of new oil and gas blocks, signaling the recovery of the investment climate in the country's oil and gas sector.

Iin Arifin Takhyan, director general of oil and gas at the Ministry of Energy and Mineral Resources, said that the results were better than expected because the government had offered a better production split for investors.

"The tender gave equal treatment and opportunity to all companies participating. We want to get the best companies to run the upstream business of oil and gas," Iin said.

The tender will bring a total of US$170 million in new investments for exploration activities, while the government will bag signature bonuses totaling $19.9 million, which have to be paid by the winners within 30 days of signing their contracts.

The Oil and Gas Upstream Regulatory Body (BP Migas) expects winners to sign contracts in early October, he added.

The eight new oil and gas blocks were awarded to local and foreign companies, out of 11 blocks offered by the government in open bidding, launched in February this year.

Three blocks that failed to attract investors were Rembang, East Kangean, and North Bali II.

Under the previous production sharing contracts (PSC), the share split was 85-15 percent for oil and 70-30 percent for gas, with the largest portion going to the government and the smallest, to contractors. Under the new PSCs, the investors' share split is raised to 25 percent for oil and between 25 percent and 30 percent for gas.

The oil and gas sector, which was once the darling of foreign investors in Indonesia and the main foreign exchange earner, has been steadily declining over the last few years.

Last year, Indonesia auctioned off dozens of blocks, but none attracted investors. At the peak of the country's investment climate in 1997, Indonesia signed 29 oil and gas contracts.

Statistics provided by Anglo-American energy giant BP Plc show the country's oil production was down from 1.39 million barrels per day (bpd) in 2001, to 1.27 million bpd in 2002. The 2004 State Budget projects that oil production will decline to 1.15 million bpd.

In natural gas, BP Migas recorded a decline in production, from 2.9 trillion standard cubic feet (tcf) per day in 2000, to 2.8 tcf in 2001

Investors have complained about government policies which they said hampered investment in the sector.

Among others, regional autonomy which resulted in overlapping regulations and authorities between the different administration levels, regencies, provinces and the central government.

Confusion over Pertamina -- and the government's role under the liberalized oil and gas sector -- also turns investors away, aside from prevailing corruption, political risks and taxation problems.

The list of winners of the tender of oil and gas blocks

Block Winners

Merangin I PT Medco Energi Internasional Tbk Merangin II PT Sele Raya Bulu PT Petrol and Energy North East Madura I The consortium of Korea National Oil

Corporation & Petrovietnam Investment and


North East Madura IIThe consortium of Korea National Oil

Corporation & Petrovietnam Investment and

Development & SK Corporation

South Madura PT Eksindo Petroleum Tabuhan North Bali ISantos Pty. Ltd TarakanProvident Indonesia Energy LLC