Pertamina signs 7 oil contracts with private firms

Pertamina signs 7 oil contracts with private firms

JAKARTA (JP) The state-owned oil company Pertamina signed
five production-sharing contracts yesterday for oil and gas
exploration and production with foreign companies and technical
assistance contracts with two domestic firms.

Out of the five production-sharing contracts, two were signed
for the extension of the exploration and production rights of
Santa Fe Energy Resources of the United States and Asamera
Overseas Ltd, a subsidiary of Gulf Canada Resources.

"The two contracts are extended for another 20 years, from the
year 2000 to 2020 for Santa Fe in Irian Jaya province and from
2003 to 2023 for Asamera in South Sumatra," Minister of Mines and
Energy I.B. Sudjana told the press after witnessing the signing
of the contracts.

The extended contracts require Santa Fe, which is in
partnership with Coparex, Ciegco Vogelkop INC and Mitsui Oil
Exploration Co. Ltd, to spend at least US$10.2 million for the
first five years and Asamera to spend $65 million for the first
nine years for exploration activities.

The three new contracts were awarded to Eurafrep Resources BV
of the Netherlands for exploration at an onshore block in Central
Java; to Canadian Petroleum Indonesia Ltd. at an offshore block
in Maluku; and to Chevron Sibolga Ltd. and Texaco Exploration
Sibolga of the United States at an offshore block in Sibolga,
North Sumatra.

The three new contractors are required to spend at least $27
million, $42.8 million and $22.75 million respectively during the
first 10 years of exploration activities.

In May, Pertamina signed two production-sharing contracts with
foreign companies: a joint venture of Overseas Petroleum and
Investment Co. (a subsidiary of Taiwan's state-owned company
China Petroleum Corporation) with Treasure Bay Enterprises, and a
joint venture of Premier Oil Pangkah Ltd with Seafield Resources
and Amerada Hess.

According to the minister, Pertamina is likely to sign a
number of oil contracts with foreign companies later this year.
"There are at least six contracts under consideration," he noted.

Pertamina's data shows that Indonesia now has 59 production-
sharing contracts with foreign companies.

Incentives

The technical assistance contracts signed yesterday were
awarded to two domestic companies, PT Pilona Petro Tanjung Lontar
and PT Garis Astatunggal Bangkudulis.

Speaking at the signing ceremony, Sudjana said Indonesia has
no intention of issuing new incentives because the country is
still attractive for foreign oil investors.

"Foreign investors are still very interested in exploring for
oil and gas reserves in Indonesia, which has offered adequate
incentives. I'm optimistic that the attractiveness will continue
in the future," he said.

Existing incentives are given to investors exploring for oil
and gas reserves at frontier areas, mostly in the eastern part of
the country, where they can receive 35 percent of their oil
production, as compared to only 20 percent elsewhere.

Besides, the minister said, oil prices are currently high,
reaching $22 per barrel on the world market, which will certainly
encourage investors to enhance their exploration activities in
Indonesia.

He expected that oil prices would continue to strengthen until
the end of this year because demand for the energy resource is
increasing due to the winter season in the northern hemisphere.

"Members of the Organization of Petroleum Exporting Countries
(OPEC), including Indonesia, are also strongly committed to
complying with the organization's quota agreement," he said.

OPEC's total production ceiling is set at 25.033 million
barrels per day.

Sudjana also said that oil supply from the North Sea is
expected to decrease, which is likely to affect the world's oil
market.

Recently, Pertamina asked the government to approve the tax
consolidation as a new incentive to attract oil investors to
engage in exploration in frontier areas. But seemingly, such an
incentive is unlikely to be granted in the near future because it
is feared it will affect the country's tax revenue.

Under the proposed tax consolidation, investors' losses from
exploration in frontier areas should be deductible from their
taxable profits of other oil fields they operate in the country.
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