Investors eyeing Indonesian oil, gas fields

Evi Mariani, The Jakarta Post, Jakarta

At least 36 potential investors are ready to bid for 11 oil and gas concessions on offer since February from the government.

However, the government is expecting more investors to make bids as the offer is open until the end of July.

"So far, 36 investors have shown interest in the 11 new concessions. We expect more to come by the end of July," Iin Arifin Takhyan, director general for oil and gas at the Ministry of Energy and Mineral Resources said on Friday.

The winners will be announced in August, he added.

For the concessions, the government will increase the production share for contractors from 15 percent to between 20 percent and 25 percent for oil, and from 30 percent to between 35 percent and 45 percent for gas.

For example, the government offers a 20 percent production share to contractors for offshore areas in south and north Madura and 25 percent for areas in Sumatra and Kalimantan.

Even though there is no certainty that the government will reach agreements with the investors on the signing of the 11 concessions, the interests shown by the potential investors are indeed a good sign for the Indonesian oil and gas industry after it saw a bleak period last year.

Last year, the Oil and Gas Implementing Body (BP Migas) reportedly signed only two contracts -- one new contract and one extension -- as compared to 28 contracts signed in 1997 and eight in 2001.

Earlier this year, oil and gas investors said they wanted "more interesting" contractual terms that would assure greater rewards for investors.

Indonesia's foreign investment environment in general, not only of oil and gas, has been losing its attractiveness due to numerous problems including the high costs in time and "fees" in dealing with all the bureaucratic red tape, the political and legal uncertainties, an unattractive labor law and the slow improvement of even relatively low-tech infrastructure such as electricity.

The higher percentage of shares for the investors offered by the government shows that the country is desperate for new investment as soon as possible as the country's oil and gas reserves, which have been the stellar source of income since the 1970s, are steadily dwindling.

Oil and gas experts have said the country would likely be a net oil importer as soon as next year.

After the government secures the contracts for the 11 concessions, it plans to open tenders for nine other oil and gas blocks in October.

New fiscal terms for 11 open acreage concessions offered

No. Block Size Contractor take (%)

(Sq Km) After tax

Oil Gas

1. Merangin I Onshore 3,247 25 40

Central Sumatra 2. Merangin II Onshore 2,847 25 40

Central Sumatra 3. Rembang Offshore 4,220 25 40

North Central Java 4. Bulu Offshore 3,494 20 35

North Central Java 5. South Madura Offshore 1,586 20 35

East Java 6. Northeast Madura I 3,434 20 35

Offshore, East Java 7. Northeast Madura II 4,617 25 40

Offshore, East Java 8. East Kangean Offshore 5,448 25 40

East Java 9. North Bali I Offshore 3,954 25 45

East Java 10. North Bali II Offshore 3,869 25 45

East Java 11. Tarakan Offshore 638 25 40

East Kalimantan

Source: Ministry of Energy and Mineral Resources, Directorate General of Oil and Gas