Thu, 08 Apr 2010

From: The Jakarta Globe

By Irvan Tisnabudi
Malaysian state oil and gas company Petronas plans to expand its investments in Indonesia, including in the upstream sector, Coordinating Minister for the Economy Hatta Rajasa said on Wednesday.

“They expressed a commitment to expand investment in the upstream and downstream sectors of the oil and gas industry,” he told reporters following a meeting with the president of PT Petronas Niaga Indonesia, M. Ibrahimnuddin M. Yunus, and Malaysian Ambassador Zainal Abidin M. Zain.

“When the Energy Ministry opens tenders for new oil and gas areas, we’ll push [Petronas] to participate,” Hatta said.

He explained that the government wants to encourage firms like Petronas to look for new oil reserves in remote areas because of declining production in the country’s existing, mature fields.

He did not provide details. Yunus could not be immediately reached for comment.

The Energy Ministry announced on Monday plans to open tenders for 35 oil and gas blocks this year, most of them in eastern Indonesia.

Minister of Finance Sri Mulyani Indrawati warned earlier this month of a likely shortfall in the country’s oil production this year due to aging wells.

Efforts to lure investors into new oil and gas areas have been relatively unsuccessful. A tender for new oil and gas working areas last year was widely shunned because of uncertainty over cost recovery for oil and gas projects. Only five of the 16 blocks offered by the government in December attracted successful offers.

The government is planning to issue a new regulation on cost recovery in the oil and gas sector, which some said would put a cap on the expenses that can be claimed back by oil and gas contractors from the government.

In December last year, Petronas won the rights to distribute subsidized fuel in Medan, North Sumatra, ending the monopoly of state-owned PT Pertamina. The Malaysian company began distributing non-subsidized products here in December of 2005 and now operates 19 gas stations in Greater Jakarta, Bandung and Medan. The company reportedly expects to have up to three more gas stations by 2011.

However Petronas is less aggressive in the Indonesian upstream oil and gas sector. Out of the six oil and gas blocks it owns, two will reportedly be relinquished to the government because they lack prospects. They are the Karapan block in East Java and the Northeast Madura offshore block.

The remaining four blocks are still in the exploration stage with the Ketapang offshore block in East Java likely to start production in the near future.