Oil, gas concessions spark interest in 15 bidders

Fitri Wulandari, The Jakarta Post, Jakarta

Fifteen companies have submitted their bids for eight oil and gas concessions out of the 11 on the block, raising hopes that the investment climate in the sector has improved.

Iin Arifin Takhyan, director general for oil and gas at the Ministry of Energy and Mineral Resources, said the result was much better than last year. He said that 40 companies had purchased tender documents, of which 15 had proposed their bids for eight concessions.

"The result is better ... Maybe because the fiscal policy is attractive or the investment climate is improving," Iin told reporters on Thursday.

Last year, the government auctioned off 14 oil and gas concessions, but the offer only drew one bidder. Many analysts subsequently warned that the investment climate in the country's oil and gas sector had waned, as it had in other industrial sectors.

The 11 concessions offered this year are located in Sumatra (2 contracts), off the coast of Rembang, Central Java (1), off the coast of East Java (5), off the coast of Bali (2) and off the coast of Tarakan island, East Kalimantan (1).

Iin said the 15 companies, in their proposed bids, detailed their work plan for the concessions in which they are interested.

"The tender committee (formed by the government) will choose which companies have offered the best three-year operational program," Iin said.

Details on the 15 companies -- 11 multinational and four local -- are to be released publicly on Friday, he said, with winners of the tender to be announced on Sept. 1.

At this year's auction, the government offered a better production-sharing deal in an effort to lure more investors, which may have also affected the number of interested bidders.

Under the standard production-sharing contracts, investors are entitled to take 15 percent of their oil output and 30 percent of their gas output, and the remainder goes to the government.

For the concessions offered this year, however, the government increased the oil split for investors to between 20 to 25 percent, and to between 35 to 40 percent for gas.

Iin further said there were several companies who had voiced their interest in four other oil and gas concessions, consisting of two new concessions and two concessions unsold from last year.

"They (investors) came to us and said they were interested in the four blocks. If the tender for the four concessions is successful, we can hope to sign contracts on a total of 12 concessions this year."

The oil and gas sector has been the main source of income for the government over the past three decades.

Last year, the sector contributed 29 percent of the government's income and absorbed about 40 percent of total investment spending in the country.