Govt eyes incentives from gas fields

Leony Aurora, The Jakarta Post/Jakarta

In a bid to increase gas output and secure domestic supply, the government is planning to draft another incentive package to lure investors to exploit the country's marginal gas fields.

Upstream Oil and Gas Executive Agency (BP Migas) chairman Kardaya Warnika said on Friday that although the details of the incentive package were being studied, one definite requirement would be for the output to be sold on the domestic market.

"Within one or two months we will come up with a more concrete proposal," Kardaya said.

Potential marginal gas fields are situated offshore Java, offshore and onshore Sumatra and East Java, said Kardaya.

"We are yet to make a genuine inventory of the potential," Kardaya said.

He said the incentive might not be similar to that given to the small oil field operators.

Only recently, to reach its target of increasing crude oil output to 1.3 million barrels per day (bpd) from the less than one million bpd currently, the government launched an incentive scheme for operators of marginal oil fields.

Oil operators of such fields -- fields with a rate of return of less than 15 percent and located within a producing block -- will be able to recover 20 percent more of the costs incurred on top of the 100 percent already stipulated in their contracts.

At least eight oil companies, including PT Medco Energi Internasional, BP Plc., Caltex Pacific Indonesia and Energi Mega Persada, have submitted applications to work in 30 marginal fields located within their operational areas.

Indonesia has a massive reserve of gas, one of the world's largest, estimated to be 188.34 trillion standard cubic feet (tscf), although annually, the country only manages to produce about three tscf, some half of which is exported.

The government has said that local industries as well as power plants needed to rely more on gas, amid record-high oil prices and surging state subsidies, and concerns over the availability of the conventional fuel in the future.

Elsewhere, BP Migas is studying options for an incentive for operators to develop aging oil fields, also called brown fields, to stem the steadily dwindling oil output.

"Brown fields are much more complicated than marginal fields," Kardaya said.

"Each area differs from the other. Most likely we will calculate the incentive based on the difference between the field's oil output, with and without the incentive," he added.