Minister meets with oil contractors as government struggles to woo investment

Minister of Energy and Mineral Resources Ignasius Jonan met on Friday for a breakfast meeting with 52 oil and gas contractors in the country as the government struggles to woo badly needed investment in the upstream sector.

The ministry said in a statement that during the meeting, it was for the first time the minister made a direct sales pitch to the contractors for 15 oil and gas blocks which were first offered to investors during the Indonesia Petroleum Association (IPA) conference in May but which has received lukewarm response as so far only 12 contractors have collected the offer documents.

?This is for the first time that the energy minister is directly involved in offering oil and gas working areas to investors. This shows the government?s seriousness in the efforts for the oil and gas industry to obtain large investment. Since offered at the IPA (conference and exhibition) in May, to date 12 investors have collected offer documents for seven oil and gas working areas,? the statement said.

The government is offering 15 oil and gas working areas (WKs) comprising of 10 conventional WKs and five non-conventional WKs.

The government has been struggling to lure fresh investment into the country?s upstream sector in a bid to help find new reserves and increase production, but so far results have been disappointing particularly amid the lingering weak oil price environment, which saw crude dropped to as low as US$40 per barrel in 2015. During the year, of the eight oil and gas blocks offered to investors, not a single interest was made. Last year, of the 14 oil and gas blocks offered by the government, only one company expressed interest.

Chairman of the upstream oil and gas authority SKK Migas, Amien Sunaryadi said on Thursday that investment in the upstream sector in the January-June period of this year totaled only US$3.98 billion, or a nearly 30 percent drop compared to $5.65 billion in the corresponding period of last year. It is also much lower compared to $7.74 billion in the first-half of 2015.

Amien said that the first-half 2017 realized investment was still far below the full-year target of $13.8 billion. Of the total $3.98 billion investment during the first-half of this year, $3.96 billion were spent for exploitation activities, and only $0.02 billion for exploration activities to find new reserves.

Deputy Minister of Energy and Mineral Resources Arcandra Tahar told a press conference following the Friday breakfast meeting that the government now wants to be more proactive in offering oil and gas working areas to investors. ?Last year, when the offer was opened, there were plenty of interests, but there was no winner. This year, we start a new approach, we?ll be proactive,? he said as quoted by the statement.

Arcandra said that based on inputs from the oil and gas contractors, there were a number of factors that caused last year?s offers failed to be sold to investors among others technical and commercial factors that are less attractive, and less supporting regulations.

He said that going forward, the government will try to improve the shortages including planned tax incentives for oil and gas contracts using the newly-introduced gross split scheme.

Conventional oil and gas working areas offered to investors via direct offer mechanism include Andaman I, offshore Aceh; Andaman II, offshore Aceh; South Tuna, offshore Natuna; Merak Lampung, offshore and onshore Banten-Lampung; Pekawai, offshore East Kalimantan; West Yamdena, offshore and onshore Maluku; and Kasuri III, onshore West Papua.

Oil and gas working areas offered via direct tender mechanism are Tongkol, offshore Natuna; East Tanimbar, offshore Maluku; and Mamberano, offshore and onshore Papua.

Deadline for the collection of document offers for the conventional working areas has been set on July 17 (for direct offer mechanism) and September 26 (for regular tender).

Meanwhile, non-conventional oil and gas working areas offered via direct offer mechanism are MNK Jambi I, onshore Jambi (shale hydrocarbon); MNK Jambi II, onshore Jambi and South Sumatra (shale hydrocarbon); and GMB West Air Komering, onshore South Sumatra (coal bed methane/CBM)).

Non-conventional oil and gas working areas offered via regular tender are GMB Raja, onshore South Sumatra (CBM); and GMB Bungamas, onshore South Sumatra (CBM).

The deadline for collecting the document offers are set for July 12 (for direct offer mechanism), and September 25 (for regular tender).

Editing by Reiner Simanjuntak