Government mulls 'rewards' for unexploited oil, gas fields

JAKARTA (JP): The government is considering offering incentives to encourage production of oil and gas fields with small proven reserves, Minister of Mines and Energy Kuntoro Mangkusubroto said on Friday.

"There are many marginal oil and gas fields left unexploited; maybe because our policies, (including) our tax policies, aren't conducive enough," Kuntoro said at a weekly media conference.

He said the government would hold a seminar in February next year to get feedback from the industry concerning the incentives as it expected to formulate an incentive package by mid-1999.

Incentives for marginal fields have long been called for by the oil and gas industry as a means to increase the country's oil output.

Leon Codron, president and resident manager of Atlantic Richfield Indonesia Inc. (ARII), a subsidiary of the United States' Atlantic Richfield Co. (ARCO), said on Thursday that some half a billion barrels of known oil reserves in Indonesia were sitting in fields currently too small for viable development.

"Economic incentives in the form of interest-cost recovery on unrecovered capital, investment credits and domestic market holidays on oil are needed to make investment in these identified oil sources more attractive," Codron said at a discussion during the two-day Indonesia Forum international seminar.

State oil and gas company Pertamina has launched several incentive packages since the early 1990s to encourage oil and gas exploration in frontier areas and deep-water areas, particularly in eastern Indonesia, and the use of tertiary enhanced oil recovery (EOR) technology.

Under the packages, the government reduces its share in the contractors' oil output to between 65 percent and 75 percent from 85 percent for conventional areas, and cuts its share of their gas output to between 55 percent and 65 percent from 70 percent for conventional areas.

But Pertamina has not yet introduced any incentives for the exploitation of marginal fields.

Analysts believe Pertamina is reluctant to launch the incentives out of fear that the incentives would reduce the government's earnings from the fields. (jsk)