Govt offers higher production share for investors in new block tender

The government is offering a higher production share for contractors ? 30-35 percent for oil and 35-40 percent for gas ? in the new oil and gas block tender in order to attract investors amid slowdown in the global oil industry, Directorate General of Oil and Gas said in a statement on Friday.

Normally, the production split in the production sharing contract (PSC) for oil is 85:15 percent for the government and contract respectively, and 70:30 percent for gas, Djoko Siswanto, Director of Oil and Gas Upstream Business Oversight, said on Friday while announcing the Tender of 2015 Oil and Gas Conventional Blocks at Grand Aquila hotel in Bandung.

He said the exact amount of production share to be offered to investors depend on the location of the blocks and the level of difficulties of each block.

Of the eight oil and gas conventional blocks offered this year, most of them has an oil production split of 35 percent for contractors and 65 percent for the government. Only three of them ? namely South West Bengara, Rupat Labuhan and Nibung ? offers a production split of 30:70 for contractor and the government respectively. As far as gas production is concerned, only South West Bengara has a production split of 35:65. The others have a gas production split of 40:60.

Besides, in order to further attract investors, Djoko said the government will provide incentives such as exemption from Land and Building Tax (PBB) during exploration. ?Aside from PBB, we shall propose to the ministry of finance that all (taxes) related to exploration activities be waived since there isn?t any profit during exploration,? he said.

Another facility offered to investors is an integrated one-door licensing service jointly provided by the ministry of energy and mineral resources and the ministry of forestry.

For the first time in Indonesia, the tender will be held through an online system. The system aims to upgrade the transparency and accountability of the tender and as such raise the interest of investors.

?Thus, the tender is not only accessible in this country but also from around the world,? Djoko said, adding that the introduction of the online system is in line with the public?s demand for transparency in many sectors.

In the first phase, the online system will be applied until the phase of clarification forum. Data opening and bid submission will still be conducted manually, he said, while urging investors to contact the director general of oil and gas in case they see obstacles.

Editing by Johannes Simbolon