Indonesia sweetens oil terms to lure investors
Indonesia sweetens oil terms to lure investors
VIENNA (Reuters): Indonesia hopes to lure fresh interest from
foreign investors to its mature upstream oil and gas sector by
sweetening exploration terms, Energy and Mines Minister Purnomo
Yusgiantoro said on Sunday.
OPEC's only Asian producer plans to offer 28 exploration
blocks out for bidding early in 2001 and will work on a case-by-
case basis to improve fiscal and production-sharing terms to
attract investors, Yusgiantoro said.
Some of the new blocks will include uncharted territory in
deepsea and onshore areas. There will also be a technical
assistance contract with state company Pertamina for an existing
field.
"The bottom line is, we want to get investors to come and
explore for oil and gas in Indonesia. We will closely watch this
bidding round, it will be an important indicator of how
attractive Indonesia is to investors," the minister told Reuters
in an interview.
"If we don't get much interest, it will be a signal that we
need to make terms even more attractive," he said.
Indonesia has seen crude output drop this year because of
technical problems and labor disruptions. It is struggling to
meet an OPEC quota target of 1.385 million barrels per day (bpd).
Industry sources pegged Indonesian output at about 1.26
million bpd in October. The gas-rich nation also produces about
200,000 bpd of condensate.
Yusgiantoro said the country had potential spare capacity of
between 60,000 and 75,000 bpd in the short-term, but would need
time to bring onstream those flows. He declined to give any
timeframe.
In the medium term, Indonesia hoped to be able to add 100,000
to 150,000 bpd, he said.
He said that apart from new developments such as the 100,000
bpd West Seno project, extra crude would also come from
rehabilitation of existing fields.
"Most of our fields were discovered a long time ago but there
is still a lot of potential in these existing oilfields and this
type of work is attractive to oil companies," he said.
He said that as well as attracting investment into the oil
sector, Indonesia was keen to develop gas reserves.
"Oil is giving us foreign exchange and meeting some domestic
demand, but we are very gas rich and we also see good potential
to substitute oil consumption with natural gas," he said.
The Indonesian Gas Association expects domestic gas
consumption to rise 9 percent a year over the next five years to
3.6 billion cubic feet per day in 2005.
Yusgiantoro said that a shift in oil production sharing ratios
would be one incentive to entice foreign oil firms.
Current standard contracts give a 85:15 spilt to the
government, but deepwater areas might be raised to 80:20, he
said.
Changes to fiscal terms may also include depreciation
schedules, tax breaks, investment credit and domestic market
obligations.
The government is also considering an easing of import
procedures to make it easier and quicker for contractors to bring
equipment and materials into the country.
"We want to make it simple, but this has to be on a case-by-
case basis to reflect the degree of difficulty of the project.
Deepsea areas will need bigger enticements than onshore,"
Yusgiantoro said.