Govt rules out share split change in oil and gas contract

A senior official at the ministry of energy and mineral resources said on Thursday the government had thus far had no intention of changing the share split in the oil and gas contracts to attract oil and gas investors.

Director general of oil and gas Rachmat Sudibjo told Petromindo.Com that the government would prefer offering alternative incentives, including investment credit and interest-cost recovery, to attract investors.

"As far as share split is concerned, we have to be careful. A change in the share split would have a large impact," Rachmat said, but he did not specify the impact.

Under the standard production sharing contract (PSC) system, contractors keep 15 percent of their oil output and 30 percent of their gas output, while the government takes the remaining 85 percent of oil output and 70 percent of gas output.

But, many countries have been offering a larger share split to investors amid tougher competition to lure investors.

Rachmat insisted that Indonesia would remain attractive to investors despite its policy of maintaining the current share split given its rich hydrocarbon resources.

He said other countries may offer more attractive share split, but investors would not go there if the countries did not have rich hydrocarbon resources.

The fact that many investors were interested in the six blocks in the deepwater areas in the Makassar Straits offshore East Kalimantan proved that Indonesia was still attractive to investors, Rachmat said.

"Unocal Corp (an American energy firm) and TotalFinaElf (a Franco-Belgian energy firm) are among the companies which are participating in the tender of the blocks.

"Investors are still interested in the bidding despite the fact the areas are highly risky and the development of the blocks need big costs and bring about small profit margins," Rachmat said. (Godang)