Mon, 02 Jun 2003

Government to tender nine new oil, gas fields

Fitri Wulandari, The Jakarta Post, Jakarta

The government was planning to offer nine new oil and gas field concessions to investors in October this year, the Ministry of Energy and Mineral Resources said Sunday.

Ministry oil and gas director general Iin Arifin Tachyan said the fields were located in Papua, East Kalimantan, South Sulawesi, Natuna Island and offshore Java.

"The tender of the new nine oil and gas fields is expected to take place in October, after we secure contracts from the previous round of tenders," Iin told The Jakarta Post.

The government earlier this year offered 11 oil and gas field concessions.

Iin said the tenders would be closed at the end of July and the winners announced in August.

Iin also said the government was studying the possibility of providing incentives to investors by increasing the production split "so that they invest more in the sector."

He did not elaborate.

Under existing production-sharing contracts, investors are entitled to take 15 percent of their oil output and 30 percent of their gas output. The remainder goes to the government.

Iin said that in the earlier offering, the government had already increased the oil split for investors to between 20 percent to 25 percent, and to 35 percent for gas.

The oil and gas sector has been the main source of income for the government for the past 30 years.

Last year, 29 percent of the government's income came from this sector, where investors between US$5 billion and $6 billion on exploration and production activities, or about 40 percent of total investment in the country during that period.

However, due to various uncertainties at home and overseas, investment in the oil and gas sector has started to decline. The government only signed two new contracts last year.

Industry experts have said that though Indonesia is rich in hydrocarbon deposits, it is still an unattractive investment due to its many problems.

They said the country should create a clear legal framework and fiscal environment, respect contracts and provide better contractual terms to attract new investment in the increasingly competitive global oil and gas industry.