Bidding round ends in disappointment as govt insists on higher split
Tuesday, June 13 2017 - 07:30 AM WIB
The 2016 exploration acreage bidding round ended in disappointment with only one company managed to win a block out of 17 conventional and non-conventional blocks offered by the government.
The bidding also failed to attract interest from international oil and gas majors as only French giant Total SA submitted an offer.
According to data from the Ministry of Energy and Mineral Resources obtained by Petromindo.com only less-known independent oil and gas firm Azipac Asia Pacific is slated to win Oti block, offshore East Kalimantan.
Azipac, which bid for Oti under regular tender will pay US$500,000 of signature bonus, with firm commitment of $1.9 million in G&G and 1,000 km of 2D seismic. The company offered 61.5: 38.5 production split for oil, and 56: 44 for gas, in favor of Indonesian government.
Under the new regulation, the tender must adhere to the newly introduced gross-split system, where cost recovery is no longer recognized.
An industry source told Petromindo.com that the disappointing result is mostly because of investors? lack of confidence in the gross split system. ?Investors feel that the new system only benefits the government and does not offer incentives that the investors need especially during the low price of oil,? the source said, adding that the government also set ?too high? minimum gross split in its favor.
The ministry offered 14 conventional blocks, seven of which were tendered through direct offer and the rest through regular bidding. Also offered were two CBM blocks and one shale block.
Out of the seven blocks, only four managed to get bidders? interest with Total bid for Ebuny block, offshore Central Sulawesi. Total submitted a $34 million program which included $1 million G&G and $33 million to drill one exploration well. The government turned down the offer on the base that the standard cost for such drilling program is $47 million. Total only offered signature bonus of $50,000, far lower than minimum $500,000 required by the government for the block. Moreover, Total also asked for 55:45 split for oil and gas, far higher than the minimum split of 63:37 for oil and 58.5: 41.5 (in favor of government) for gas asked by the government.
In Onin block onshore West Papua, Agra VI-Azipac-Indrillco also failed to win as the split the company asked 61.5: 38.5 for oil and 56: 44 for gas is higher than the government?s minimum standard of 63:37 split for oil and 58.5: 41.5 for gas.
Agra V- Baruna Energy-MIT IVEL consortium, which bid for West Kaimana III block onshore West Papua, was declared financially unfit to run the block.
Another Indonesian firm IDX-listed PT Energi Mega Persada Tbk, which bid for Batu Gajah II block, onshore Sumatra, was disqualified due to incomplete documents.
For regular blocks, there were only bids for three blocks from three companies, namely Azipac in Oti Block, Ophir Energy in Manakarra Mamuju block, offshore Kalimantan, and Agra Energi Indonesia in Kasuri block, West Papua. The last two companies failed to win the blocks as the production split they asked was higher than government?s minimum standard.
The three unconventional blocks failed to attract legitimate bidder.
A source at the ministry said that the result of the 2016 bidding round is awaiting for approval from Minister of Energy and Mineral Resources Ignasius Jonan.
Editing by Alexander Ginting