External problems seen as dominant obstacle to oil, gas exploration

External problems related to licensing issue, overlapping land, compensation, and other social issues are seen as the dominant obstacles for production sharing contractors (PSCs) in carrying out oil and gas exploration activities, according to the results of evaluation by upstream oil and gas authority BPMIGAS.

Out of 121 PSCs whose exploration period has exceeded three years, 69 have yet to fulfill their exploration commitment, BPMIGAS said. ?Based on the mapping carried out by BPMIGAS, external factors remain the main obstacle faced by the 69 contractors of the exploration working areas,? said BPMIGAS Deputy Chairman, J. Widjonarko at the opening of the Farm In-Out Forum 2012 in Bali Friday.

To help the PSCs deal with the exploration obstacles, BPMIGAS last year set up a special forum for the PSCs called FOKWE, which among others is tasked with setting up strategies on how to deal with the external problems. A FOKWE committee last year held out a discussion forum, where successful PSCs shared their experiences in dealing with the external problems in hope that they could inspire other PSCs.

Another major obstacle is internal factor related to financial problem (a problem suffered by 24 percent of the 69 contractors) as the upstream oil and gas sector is capital-intensive and high risk industry. To help deal with the problem, some PSCs plans to sell their shares in their working areas to spread risk.

Widjonarko said that according to existing regulations, the PSCs have the rights to spread the risk of their investment, but stressed that during the first three years period, the PSCs are forbidden from transferring their operatorship role, and thus must maintain their status as the main shareholder in the concession.

The Farm In-Out Forum in Bali is one of FOKWE?s strategic programs where PSCs can meet with potential investors. A total of 22 PSCs looking for investors opened booth at the forum.

Editing by Reiner Simanjuntak