Govt to provide incentives for contractors to raise output
Friday, September 15 2000 - 07:00 AM WIB
The government would provide incentive for oil and gas companies to develop marginal fields to boost the country's oil output following the recent decision by the Organization of Petroleum Exporting Countries (OPEC) to raise production, a top official of the ministry of energy and mineral resources said on Friday.
Director general of oil and gas Rachmat Sudibyo told Petromindo.com and Reuters that incentives would also be provided for companies to repair old and abandoned oil wells and resume productions there.
"Developing the marginal fields takes time, maybe six months. But repairing old wells could be faster," Rachmat said.
He said the government was studying the kind of incentives that it would provide to the oil companies.
"When the oil price was at US$10 (per barrel), we provided significant incentives. But now with the oil price reaching $30 per barrel, we don't need to provide big incentives," Rachmat said.
However, Rachmat rules out the possibility of the government reducing its share in the production of oil contractors as part of the incentive program. Under the current production sharing contract system, the government takes 70 percent of the contractors' output, leaving the remaining 30 percent to the contractors.
As part of the incentive program, Rachmat said, the government might provide the contractors with investment credit to develop marginal fields or repair old wells.
Under the current production sharing contract system, contractors should use their own money to explore for oil and the government would not reimburse their expenditure if they fail to find oil reserve. Under the investment credit scheme, the government allows contractors to secure loans from banks for its exploration activities and the government will reimburse some of their expenditures if they fail to find oil.
OPEC recently raised its output quota by 800,000 to curb the rise in oil price. Indonesia is allowed to raise output by 41,000 barrels per day from 1,317,000 barrels per day at present.
Rachmat noted that many oil contractors were now interested in exploring for oil in Indonesia, especially in the Makassar Straits, where American oil and gas company Unocal had found a significant oil reserve (godang)