Govt drafts incentives for exploration

Govt drafts incentives for exploration

Leony Aurora, The Jakarta Post, Jakarta

In a bid to attract exploration efforts in the country's eastern
frontier, the government is drafting new incentives, which may
involve a shorter commitment period for exploration.

Chairman of the Upstream Oil and Gas Regulatory Agency (BP
Migas) Kardaya Warnika said the agency would propose to the
Ministry of Energy and Mineral Resources that the exploration
commitment be limited to geological studies and seismic testing
only.

"Drilling, usually conducted after successful seismic tests,
will be left as an option, not a commitment," Kardaya said on
Friday, after attending the inauguration of 13 oil and gas fields
valued at US$1.2 billion by President Susilo Bambang Yudhoyono.

"The commitment (period) can be halved from six years to three
years," he said. "This proposal was based on inputs from
investors and hopefully can make the frontier area more
attractive."

In regular tender process to get an oil and gas block, the
government considers bidders' plans for geological and seismic
tests, as well as the number of wells to be drilled.

Kardaya further said that the agency was still studying
incentive options for brown fields, which are fields that have
passed their peak period of production, to make them commercially
viable.

"We cannot generalize incentives for brown fields as the
condition in one area differs from the others," he said.

Meanwhile, state oil and gas firm PT Pertamina, which has 41
brown fields identified so far, has already started offering the
aging oil fields to investors.

Pertamina's president director Widya Purnama said that four
multi-national investors, including the China Petroleum &
Chemical Corp., had shown interest in partnering up to develop
brown fields.

"We are ready to open the data room. They can choose the areas
they want to assist in developing," said Widya.

Indonesia is in dire need for new oil discoveries, as crude
and condensate output decline by an average of 5 percent annually
due to aging fields.

With current production at 1.075 million barrels per day
(bpd), the country still has to import 300,000 bpd of crude and
400,000 bpd of fuel products to meet domestic demand.