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.