Indonesia licence bonanza awaits S'pore firms: Report

The Indonesian government's decision to rev up the award of oil and gas exploration licences could prove to be a bonanza for mainboard-listed Federal International and several other Singapore companies which have a significant presence in that country, Business times reported.

The Indonesian government is reportedly planning to increase the number of exploration licences to 20 this year in an effort to boost revenue from energy production. This is more than double the nine licences handed out last year.

Bloomberg reported yesterday that Jakarta reckons it could get 44 trillion rupiah (S$8.3 billion) of revenue from oil and gas this year, compared with total state income of 349.3 trillion rupiah.

'Last year, we began a policy where investors can propose to us any field they want and that, we hope, will increase interest' in exploration, Iin Arifin Takhyan, director general of oil and gas for Indonesia, told Bloomberg in an interview. 'We want to keep increasing the number of fields given out and taken up.'

Although global multinationals like Exxon Mobil, Total SA, Unocal and Conoco Phillips will be among the leading bidders for the licences, there are several Singapore companies which are positioned to benefit strongly from the increase in exploration activity.

Besides Federal, other Singapore-listed players with a presence on the Indonesian energy extraction scene include oilfield engineering specialist Rotary Engineering and haulage specialist Tiong Woon Corp.

All have a presence in turnkey oil and gas engineering projects in various parts of the archipelago. In some projects, they are strategic partners, complementing each other's activities.

But of the three, Federal appears to be the most highly geared to the growth of Indonesia's oil and gas production activity and enjoys first-mover advantage in various oilfield-related engineering, infrastructure and service contracts.

It operates the country's second largest oil equipment fabrication yard, PT Gunanusa, in West Java, servicing clients such as Total, BP Arco, ExxonMobile and CNOOC and other multinationals.

Gunanusa has a memorandum of understanding with Singapore's Keppel Fels to tender for Unocal's US$150 million to US$200 million offshore production platform job. Federal also has a strong toe-hold in the resource-rich province of Jambi in Sumatra.

Its executive chairman and CEO KK Koh welcomed the good news yesterday.

'Indonesia is our biggest market and accounts for about two-thirds of our revenue,' he told BT. 'So this is great news. The more licences the government releases, the more concessions and contracts we stand to gain.'

The company raked in some $60 million in revenue from Indonesia last year, and this figure is expected to double this year.

Just weeks ago, Federal announced a partnership with PT Jaya Wijaya Raya to engage in oilfield engineering, procurement and construction activities. The joint venture has already been awarded a maiden contract worth US$21.6 million by Semco for the rental of production facilities for the Semberah Field Development project in Indonesia.

Koh said Federal was poised to gear up its turnkey projects in the country. 'Our earnings for the year ended December 2003 doubled over the previous year, and the potential inflow of these new jobs will see our earnings grow even more strongly, going forward.'

Koh said that besides turnkey engineering projects, Federal is also eyeing the possibility of bidding directly for oil and gas concessions. It is believed to be in discussions with Indonesian parties on this front.(*)