Incentives for marginal oil fields to be announced today

The government is set to announce today a package of incentives to spur oil and gas production activities in the country's marginal oil fields.

"The incentives will be announced by Minister of Energy and Mineral Resources Purnomo Yusgiantoro today," Novian Thayib, the director of oil exploration at the directorate general of oil and gas, said in Jakarta on Monday.

The marginal oil wells are referred to aging oil fields located in existing oil and gas blocks. The contractors are generally reluctant to carry out production activities in such oil fields because they are no longer economically viable for production.

Novian said that the incentives, which would be in the form of "cost recovery plus", were expected to be able to encourage the contractors to carry out production activities in the aging oil fields.

Under the "cost recovery plus", the government will cover the production cost and new investment in the aging oil fields. "With such incentives, we hope the target to increase the national oil production to 1.3 million barrels per day could be achieved by 2008," he added.

At least eight oil companies, which operate about 30 aging oil wells, will benefit from the new incentives. They include Pertamina, Medco, China National Offshore Oil Company, Energi Mega Persada, Premier, BP, Caltex Pacific Indonesia and Kondur Petroleum.

Meanwhile, the president director of PT Caltex Pacific Indonesia, W. Yudiana Ardiwinata, told Petromindo that Caltex would take the advantage of the government's offer to develop five marginal and aging oil fields in Bekasat, Riau.

"The five marginal and brown fields are quite potential to be developed," he said, but he was reluctant to unveil the production split being offered to develop these marginal oil fields. (godang)