Govt to open oil block tenders next month
JAKARTA (JP): The government plans to open the tender process for 23 new oil blocks next month, marking the government's first attempt in years to tender oil blocks, after it took over the task from state-owned oil and gas company Pertamina.
The new oil blocks include the much contested Makassar Straits deep sea blocks, which promise giant oil and gas reserves, according to Minister of Energy and Mineral Resources Purnomo Yusgiantoro.
"We will start the tender process gradually with nine blocks on March 1," Purnomo told reporters following a gathering with the country's oil and gas community.
Among the first batch are the six Makassar Straits blocks located offshore East Kalimantan.
Besides their huge oil and gas potentials, the six blocks will also become one of Indonesia's first deep sea oil projects.
The other three blocks are the Bawean I and II blocks located in the East Java Sea, and the Nila block in the West Natuna Sea.
A press statement from the ministry said that bid invitations would be sent on March 1, with June being the closing date for the submission of bids.
Interested parties can send their bids online by contacting www.INDIGO.pool.com, and request further information at www.migas.dpe.go.id.
The government will evaluate bids according to their cost competitiveness in operating the block as well as companies' investment commitments.
A winning bid is subject to presidential approval, and must afterwards sign a Production Sharing Contract with Pertamina.
Purnomo said the ministry could announce the tender results as early as July.
The government, he said, took over the tender process from Pertamina after the company complained that it had to spend around $10 million each year on the process.
But in conducting its tender procedures, the government would work together with Pertamina in a joint team, he said.
Although Pertamina officials were part of the tender team, he did not rule out the possibility of the state company participating in the tender.
Pertamina has expressed its interest in operating one of the six Makassar Straits oil blocks due to their vast potential.
But according to Purnomo, Pertamina is unlikely to operate any of these six blocks alone, and will need to form a joint venture.
"My feeling tells me that no company will enter (the tender) alone," he said.
He stressed that each of the six Makassar Straits blocks required contractors to invest US$200 million for exploration alone.
Although early indications showed that the oil blocks offered for tender are rich in oil and gas reserves, more exploration was needed to ascertain the exact reserves, he said.
Purnomo estimated that the six oil blocks would be developed by a consortium of four to five oil and gas companies.
Under a consortium arrangement, he said, Pertamina might only own a 20 to 25 percent stake.
He added that the existing oil and gas laws gave Pertamina the right to directly own a 10 percent stake in any oil block without going through a tender process.
"At the exploration stage, Pertamina could enter with a 15 percent stake, but at the production stage it could raise its stake to 25 percent," he explained.
Other companies likely to join the tender are American oil and gas companies Unocal Indonesia, and Conoco Inc., Canada's Gulf Resources, France's Total Indonesie, and Britain's Premier Oil and Beyond Petroleum (BP), Purnomo said.
Among the new companies wanting to join the tender, he added, was the German based technology and telecommunications firm Siemens.
"Siemens visited me the other day, and I thought they wanted to discuss Paiton II," he said referring to the Paiton II power plant in East Java, in which Siemens Project Ventures GmbH had a 50 percent stake.(bkm)