Govt cuts share of domestic gas deals, offers oil/gas sites
Monday, September 25 2000 - 04:00 AM WIB
The government will reduce its 70% share of domestic gas contracts this week in a bid to increase gas utilization, an official said.
"I expect that the government will issue the reduction next [this] week," Mines and Energy Department director of production and exploration Kardaya Warnika told Reuters on Friday.
He did not give further details.
"The government currently gets a 70% share in the contract and in that 70% there is a 44% tax component," he said. "It might be that the government will remove, if necessary, its share so it remains only tax."
About 40% of Indonesia's gas production is consumed domestically.
Incentives for marginal fields
Warnika also said that the government will offer incentives to encourage exploitation of the country's marginal oilfields, with a decision expected within the next few months.
"In about three months, we expect a decision on what incentives to be given," he said. "This is to increase our capacity."
He said the marginal fields could add up to 300,000 barrels per day to Indonesia's production capacity, which was currently about 1.5 million bpd.
"The potential of the marginal fields are big. If we develop our marginal fields, it could increase our production capacity 200,000 to 300,000 barrels per day," Warnika said.
But he said it could take several years to see the production from these marginal fields.
He said the details of what incentives would be given was still under consideration.
"One incentive might be that we will give more split to the contractor, the second alternative might be we give investment credit, or relieve the obligation to sell to the government at a low price, or add interest on recoverable cost," he said.
Warnika said current the split for production from oilfields was 85:15 in favor of the government for standard contracts, but he declined to say what increase for the contractor was being considered.
He said the incentives will apply only to marginal fields and will be decided on a field to field basis.
The bulk of marginal fields were located in areas already in production, such as Maxus' Widuri crude field, BP Amoco's Arjuna and Cinta fields in West Java, and also Unocal's fields in East Kalimantan.
Warnika said there has been limited motivation for development of the fields due to low oil prices last year and because contractors had already recovered the bulk of their cost with their existing production.
10-12 Gas/oil sites on offer
Warnika said the government will also offer up to 12 oil and gas blocks for exploration across the sprawling archipelago in next two to three months.
"Six blocks will be offered in the Makassar Strait, about three to four in the Arafura Sea and one to two in Natuna," he said.
"We haven't decided if these will be oil or gas blocks because sometimes they are located together," Warnika said.
"We are going to offer them in two or three months."
From January, the responsibility of oil and gas block tenders will be transferred from state-owned oil company Pertamina to the government. "We have made some administrative changes which means the tenders will no longer be legally binding unless the government handles them."
The tender process typically takes several months to complete and production from the sites, two to three years. (*)