Govt says contract extension rules to be included in upstream regulation

Government said on Monday it was preparing guidelines for oil, gas blocks contract extension, which will be included in government?s regulation on upstream sector.

?The rule for contract extension will be included in government?s regulation on upstream sector (PP Hulu), which is now being drafted. All decision regarding contract extension will have to wait for the regulation,? said Minister of Energy and Mineral Resources Purnomo Yusgiantoro.

Under the new oil and gas law, government is obliged to issue several follow-up regulations, including regulation on upstream sector. Thus far, there is no clear-cut regulation regarding oil, gas blocks contract extension and that had created confusion among investors and had caused delay in investments.

Purnomo, however, did not say when the regulation would be completed.

Several investors such as BP Plc and TotalFinaElf had asked for early contract extension for their gas blocks in East Java and East Kalimantan, respectively.

BP?s plan to exploit natural gas reserves in Terang-Sirasun field in Kangean PSC offshore East Java had been delayed for lack of contract extension guarantee and had caused severe shortage of gas supply in East Java.

Meanwhile TotalFinaElf E&P Indonesie spokesperson Ananda Idris said transparent rules for contract extensions were badly needed to allow the company to invest more. ?We are planning to make huge investment in Mahakam block and would want guarantee that there is sufficient time for us to make returns,? said Ananda. TotalFinaElf had been asking for early contract extension for its giant Mahakam block in East Kalimantan. (godang)