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NEWS UPDATES 12 September 2009

Indonesian oil and gas blocks attract few investors

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Indonesia failed to attract enough investors to develop all the oil and gas blocks offered in the first quarter of this year due to the global economic slowdown and concerns over revisions to the cost recovery mechanism, the Jakarta Post reported.

Of 16 oil and gas blocks offered between last December and April this year, only five blocks won developers, according to the final results of the bidding process announced in Jakarta on Friday.

Should the situation persist, the government will be in serious trouble due to its inability to meet oil production targets amid soaring demand that has already made Indonesia a net importing country.

“This is very bad, but this is the fact. If the situation remains like this, my objective to maintain national oil production at about one million barrels per day cannot be achieved,” said Evita Legowo, director general for oil and gas.

Evita cited three factors hampering investors’ interests in bidding for the blocks, the first being the global liquidity crisis, but the second factor is the government’s plan to revise the cost recovery mechanism.

Cost recovery is the investment reimbursement given to oil and gas contractors after they begin production.


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