Six new oil mining contracts awarded

Six new oil mining contracts awarded

JAKARTA (JP): Minister of Mines and Energy Kuntoro
Mangkusubroto awarded six new oil and gas production sharing
contracts yesterday and reassured foreign investors that their
agreements would be honored.

The six contractors, including five foreign companies, were
awarded the right to explore oil and gas resources in Irian Jaya,
the Natuna Islands and East Java for 30 years.

The contractors are Japan Petroleum Exploration Co. Ltd
(JAPEX), Lasmo (Malagot) Ltd. of Britain, YPF South Sokang Ltd,
Gulf Resources Ltd of Canada, Total of France and one local
company, Wirabuana Pan Resources.

"I want to assure contract signatories that you are dealing
with an honorable government. Once we sign a contract, we will
respect it," he said.

"I don't want to hear of any official in the Ministry of Mines
and Energy annulling a contract on the grounds that he was
coerced to sign the contract. Contract annulment is wrong in
terms of law and ethics."

Kuntoro made the statement amid growing concern among
independent power generators (IPP) following a move by the State
Electricity Company (PLN) to unilaterally annul its power
purchase contract with PT Cikarang Listrindo, which is partly
owned by former president Soeharto's cousin Sudwikatmono.

PLN's president Djiteng Marsudi annulled the contract after
the company refused to renegotiate the contractual terms to
alleviate the electricity company's financial distress amid the
monetary crisis.

Djiteng said the company could not afford Cikarang's power
rate and claimed PLN was coerced to sign the contract with the
company in the past.

He also declared that PLN was pressured to sign contracts with
most of the IPPs.

Kuntoro said yesterday a contract could be reviewed but it
should be conducted in compliance with the law.

Kuntoro has asked Pertamina to review all contracts awarded to
Soeharto's family and cronies, but he noted yesterday he would
only weed out those which "are legally flawed, and possibly not
legally flawed but are making Pertamina inefficient".

Kuntoro also said the government subsidy for fuel this fiscal
year might reach Rp 35 trillion, against the earlier projection
of Rp 9.5 trillion, if the rupiah's exchange rate remained at Rp
11,000 against the American dollar.

He said the Rp 9.5 trillion subsidy was based on the
assumption of an exchange rate of Rp 6,000.

The subsidy would increase by Rp 5 trillion for every decrease
of 1,000 in the rupiah's value against the dollar, he added.

JAPEX's contract covers 2,757 square kilometers on the Semirak
Block offshore Irian Jaya, YPF South 11,250 sq km in the Sokang
Block offshore the Natuna Islands; Lasmo 4,235 sq km on the
Malagot Block offshore Irian Jaya.

Gulf landed a contract to explore oil and gas on 4,433 sq km
on the Ketapang Block off the northern part of Madura Island;
Total 6,865 sq km on the Walo Block offshore Irian Jaya and
Wirabuana 4,000 sq km on the Karapan Block offshore East Java.

Pertamina's exploration and production director Priyambodo
Mulyosudirdjo said the new contractors pledged to invest US$318
million in exploration and development activities during the
first 10 years of their contracts.

They were also committed to pay $9.1 million each to Pertamina
as compensation for information on their concessions.

The new deals brings the number of oil and gas exploration and
production sharing contracts awarded this year to 12.

The government awarded a record of 29 oil and gas contracts
last year. (jsk)