Mon, 23 May 2011

From: The Jakarta Post
By Rangga D. Fadillah

A lack of reliable data on potential reserves is a major reason why Indonesia’s oil and gas blocks are not appealing to investors, a senior official says.

The director general of oil and gas at the Energy and Mineral Resources Ministry, Evita Herawati Legowo, announced on Friday that out of 17 blocks offered in 2010, only three were auctioned off.

The three blocks were Arguni I and South West Brid’s Head in West Papua and East Jabung, located in the border area of three provinces - Riau, Jambi and South Sumatra, she reported.

“The total investment commitment at the three blocks reached US$113 million in the first three years with a total signing bonus for the government of $31 million,” Evita said at the closing ceremony of the Indonesian Petroleum Association (IPA) 35th Annual Convention and Conference at the Jakarta Convention Center.

The winning bidder of the Arguni I block was Italy-based Eni Indonesia Limited, whose total investment commitment was $86.5 million and a signing bonus of $25 million. The South West Bird’s Head will be explored by France-based Total E&P Activities Petrolieres with a total investment of $19.5 million and a signing bonus of $5 million.

The last block, in East Jabung, will be developed by Pan Orient Holdings, which committed to invest $7.72 million and pay a total signing bonus of $1.5 million to the government.

Actually, Evita said, the Tomini Bay II block had also attracted an investor - Niko Resources. However, the government did not accept the company’s proposal because the company did not meet the technical requirements set by the government.

In December last year, the ministry also announced that only three out of the 14 blocks offered in the first round of 2010 found investors. The blocks were Sokang, South Sokang and Wokam II.

In the closing ceremony, the ministry offered 20 new oil and gas blocks. As many as 11 blocks - Ranau, Northeast Madura, Belayan, East Simenggaris, North Ganal, Babar Selaru, Obi, North Semai, West Berau and Semai IV - will be offered directly to potential investors. The remaining nine blocks - including Bulu Rembang, offshore Timor sea I, offshore Timor sea II, Halmahera I, II, III, West Aru I, II and Arafura sea II - will be offered through tenders.

Learning from past experiences, Evita said, the government had offered more blocks via direct offers. She said these had a higher rate of success than tenders.

She said the ministry would overcome the problem of poor data collection to make the country’s oil and gas blocks more appealing for investors in the future.

“For potential blocks, we’ll fix the data,” she said after the closing ceremony.

In addition to more complete data on offered blocks, investors also expect the government to provide certainty about regulations and contract terms, she continued.

Global Petroleum Survey 2010, which studied the investment climate in 133 countries, ranked Indonesia 111th. Indonesia’s rank was below those of Cambodia, Vietnam, Pakistan, Uganda and Mozambique.