MEMR plans greater revenue split for investors in marginal fields, deep sea
Saturday, September 10 2016 - 02:59 AM WIB
Director General of Oil and Gas at the Ministry of Energy and Mineral Resources IGN Wiratmaja Puja said in a statement Friday that among of the aspects being discussed in drafting the new regulation are extension of contract period, and better revenue split for investors.
Wiratmaja said that oil and gas investment in the country has increasingly become less attractive as compared to other countries. He pointed out that according to international study, the average internal rate of return (IRR) in Indonesia is far less than the world?s average of 25 percent.
He cited as an example that the IRR for the Jangkrik Field operated by ENI stands at around 5 percent. This is because when the contract was signed oil price was high. ?With current weak oil price, incentives are required to be able to operate,? he said.
He added that to attract investors in developing deep sea oil and gas assets, the government?s share of revenue must be reduced, lower than onshore development projects. He said that other countries which have done this have managed to lure fresh investment such as in Egypt, which has successfully found large oil and gas reserves, greater than that of Masela block.
Wiratmaja said that the government is also mulling to extend the production sharing contract period from the current 30 years to help attract new investment.
He said that some African countries which extended the contract period to 50 years have been successful in luring new investment. ?We?re currently determining the optimum period for exploration and exploitation,? he ended.
Editing by Reiner Simanjuntak