Govt defends Hess? contract on Semai block despite protest

The Energy and Mineral Resources Ministry has defended its decision to award an exploration right to American oil company Hess Corp on Semai V offshore oil block off West Papua despite a protest from state-owned oil and gas company Pertamina.

The ministry?s Director Gneral for Oil and Gas Evita Legowo said in Jakarta on Friday that the ministry had awarded the exploration right on the Semai V block to Hess because the American company offered a better term of contract.

?The contract has been awarded in line with the technical, economic and performance criteria stated in the existing regulation,? Evita said. ?It has been signed and it would be difficult to change it,? she added.

The 30-year contract on 3,947-square-kilometer Semai V PSC grants Hess rights to explore for, develop and produce oil and gas in the block, but Pertamina which had also bid for the block questioned the ministry?s decision.

Pertamina claimed that it had offered better contractual terms to develop the block, particularly related to investment commitment.

Pertamina offered a higher investment commitment but the signature bonus offered by Hess more than doubled than those promised by Pertamina, according to Evita.

In the bidding, Pertamina offered a signature bonus of US$15 million, while those promised by Hess amounted to $40 million.

The signature bonus is an amount of cash that should be given to the government, if a company is awarded an exploration contract on oil and gas blocks being offered. (*)