Govt to free contractors from drilling obligation: Official

The government is formulating a contract that will allow contractors to forgo drilling if they don?t discover prospective resources during seismic survey.

R Priyono, upstream director at the Ministry of Energy and Mineral Resources said on Monday the new contractual terms will reduce risks faced by contractors when exploring frontier areas.

The new terms will be included in the contracts to be offered by the government in the middle of the year.

Priyono said the government will offer 30 new blocks to investors, either through regular tender or direct offer mechanism, in the middle of the year. Most of the 30 blocks are located in the eastern part of Indonesia.

Under the existing contracts, oil and gas investors are given six years to carry out exploration activities, from seismic surveys to exploration drillings, and have to provide a bank guarantee that the government could confiscate in case they don?t carry out their drilling obligation. Many contractors have voiced complaints over the drilling obligation, arguing that there is no point of drilling areas that show no indication of hydrocarbon resources during seismic survey.

Priyono said under the contracts currently being formulated by the government and to be offered to investors in the middle of the year, contractors will be given between two and three years to carry out seismic survey on frontier areas and, in case they don?t find any resource indications there, they are allowed to relinquish their concessions to the government .

He noted however terms regarding share split and signing bonus in the new contracts will remain the same with those in the previous contracts. (Alex)