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May 31, 2008

New bidding on oil, gas blocks in October

The government will hold a bidding round for 25 new oil and gas blocks next month and expects to offer 25 more in October, said an official at the closing of the 32nd Indonesia Petroleum Association convention on Thursday, a local daily reported.

"Bidding will begin in June and submission of documents will finish in July," the Jakarta Post quoted Luluk Sumiarso, director general for oil and gas at the Energy and Mineral Resources Ministry, as saying.

He said the 25 blocks in June cover Sumatra, Java, Bali, Nusa Tenggara, Kalimantan, Sulawesi, Maluku and Papua.

Among them seven new blocks to be offered are located in Sumatra (East Seruway, South CPP, South West Bukit Barisan, Lirik II, West Tungkal, South East Tungkal and Lampung III). The rest are in Java, Bali and Nusa Tenggara, Kalimantan, Sulawesi, Maluku and Papua.

The official said the tender required interested contractors to carry out a joint study by enhancing data quality and/or by conducting a survey to bring additional data.

"We will announce another 25 blocks in October this year," Luluk said, adding that bids for the 50 oil blocks were in line with the government's target to improve declining oil output.

Indonesia, since 2004, is the only net oil importer in the Organization of Petroleum Exporting Countries (OPEC) and is planning to leave after being a member since 1962.

According to Bloomberg, the country now imports about a third of its oil. Output has fallen by 49 percent compared to the peak in 1977. Indonesia's daily oil production in April stood at around 978,000 barrels, said upstream oil and gas regulator BP Migas.

"We still need to discuss with the President and related ministries. We also need to follow some procedures before leaving OPEC," Energy and Mineral Resources Minister Purnomo told reporters after closing the IPA convention.

"But we can't tell you yet when we will officially leave as we have already paid the 2 million euros (membership fees) for this year."

Calls for the government to withdraw from OPEC have been on the rise in the past few years, not only because of the slide in oil output but also because of the financial costs of membership.

"After our oil production starts to increase again, we may rejoin the group. This has happened before in OPEC, for instance in the case of Equador," Purnomo said.

Indonesia's departure from OPEC will have a marginal impact said a Kuwaiti official quoted by Bloomberg on Thursday.

"Indonesia's oil production has been on the wane, no longer making a really significant contribution to its national income and hardly covering local needs," said Emad al-Eteqi, a member of the Supreme Petroleum Council in Kuwait, OPEC's fourth-largest producer.

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