ASEAN KEY DESTINATIONS
Govt to put more oil, gas blocks up for bidding next year
Indonesia:The government will put more oil and gas blocks up for bidding next year despite little interest from business players in previous offerings amid low prices for the commodity worldwide.
Energy and Mineral Resources Ministry’s director for upstream oil and gas, Djoko Siswanto, said at least 10 conventional and unconventional blocks would be on offer next year.
“Our target is to offer 10 blocks. At least eight of them are conventional and the remaining two are unconventional blocks,” Djoko said. Nonconventional blocks include coal bed methane and shale gas.
The bidding next year will be part of government’s measures to increase oil and gas production. This year, as many as 11 new oil and gas blocks have been offered. However, Djoko admitted that only four investors had submitted proposals for the tenders on offer.
The bearish outlook on the oil price had badly affected investors’ plans to make investments in oil and gas blocks in Indonesia, he added.
“Currently, we are competing with other countries that are offering the same opportunities but with more attractive features, in fiscal terms and in split of production for example,” Djoko said.
The world oil price has dropped around 40 percent this year. The benchmark Brent crude price was at around US$46 per barrel on the London-based ICE, according to figures from Bloomberg on Wednesday. On the same day another benchmark, the West Texas Intermediate, was traded at around $42 per barrel.
The new rounds of open bidding are expected to attract investment in Indonesia, which has been deteriorating investment in the oil and gas sector in recent years.
In 2012, 25 new oil and gas contracts were signed. The number dropped to only 14 contracts in 2013 and further plunged to only seven in 2014.
This year, 11 new oil and gas contracts were signed, raising hopes of further investment coming in. However, complicated bureaucracy has reportedly continued to contribute to low enthusiasm in the sector.
“Bureaucracy streamlining has yet to bear fruits. What is happening now is only a transfer of the permit process responsibility, while the high number of licenses that must be obtained is still the same,” said Kardaya Warnika, the head of the House of Representatives Commission VII overseeing energy.
He was referring to the government’s recent establishment of an integrated business licensing service at the Investment Coordinating Board (BKPM) office. A number of business permits related to oil and gas mining activities are now processed at BKPM instead of being shared between different ministries.
The legal certainty of oil and gas contracts in the country is also an issue that must be settled, according to the deputy chief of the Upstream Oil and Gas Regulatory Task Force (SKKMigas) Zikrullah.
“We still need to improve teamwork among institutions. Major companies are considering investment here. However, if the situation doesn’t improve, they will only wait and see,” Zikrullah said.
Djoko said that the oil and gas office was working to make the business more attractive, partly by issuing a new regulation on non-conventional oil and gas blocks. Under the regulation, investors can choose one of three contract options: a production sharing contract (PSC), which is widely implemented now, a net PSC sliding scale and gross split sliding scale scheme.
The differences of the three schemes lie in production share and the cost recovery amounts.
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