Govermnent to offer 10 new oil, gas blocks
Fitri Wulandari, The Jakarta Post, Jakarta
The government will auction off 10 new oil and gas blocks in October in a bid to boost investment in the sector amid declining oil production.
The planned offering came despite a delay in the auction of another 10 oil and gas blocks earlier this year following the introduction of a new ruling on taxation and customs in the sector.
Director General of Oil and Gas at the Ministry of Energy and Mineral Resources Iin Arifin Takyan said on Friday the new offering would bring the total oil and gas acreage to be offered this year to 27 blocks.
The total includes 10 acreages offered earlier this year and seven proposed by investors.
"The government is committed on the plan to offer new oil and gas acreages for this year," Iin said.
The 10 oil and gas acreages to be offered are located offshore from Natuna, offshore in the Makassar Strait, offshore in the Arafura sea, Papua, and offshore from South Sulawesi.
Last year, the government awarded 15 new oil and gas contracts, with a total exploration investment commitment of US$140.9 million for three years.
However, analysts said weak investment in the sector had not yet fully recovered, given that companies participating in government bidding were not top-notch oil and gas firms.
Iin added the government had delayed the bidding process for for 10 oil and gas acreages offered earlier this year until October because of the new tax and customs ruling on oil and gas.
The government has dropped the lex specialis policy for the oil and gas sector. The policy had benefited oil and gas companies because it provided duty-free facilities for imported materials used in oil and gas production.
Iin said the delay was being made because the new fiscal policy would affect the financial performance of potential investors.
"It will (also) affect government policy regarding the oil and gas production split," Iin said.
On oil and gas production, Iin said the country's oil and gas output this year was likely to drop due to declining oil and gas reserves.
Iin said oil output this year was expected to be below one million barrels per day (bpd) from an average 1.1 million bpd in 2003. It is below the country's output quota of 1.270 million bpd set by the Organization of Petroleum Exporting Countries (OPEC).
"We expect that the output will recover next year as some new oil fields will start operating," Iin said.
Among oil fields expected to commence production this year are Belanak and Prabumulih in South Sumatra province and the West Seno field in South Sulawesi province.
Natural gas output is also projected to slide slightly to 8.1 billion cubic feet per day (BSCFD) from 8.2 BSCFD in 2003 due to declining production at the Arun and Bontang fields.
"The production of gas from the Arun field will decline to 2.8 bcf (billion cubic feet) this year from 4.2 bcf in 2003," he said. The decline in production is due to natural depletion of the reserves.