Oil and gas procurement reaches $11.8 billion in 2011

The procurement of goods and services of the government?s production sharing contractors (PSCs) for oil and gas exploration and production operations reached US$11.81 billion (Rp 106 trillion) in 2011, upstream authority BPMIGAS reported.

The value of contracts for the procurement of goods and services for oil and gas exploration and production during the past several yearts continued to show a significant increase. The spending for procurement of goods and services has significntly increased from $ 6.6 billion in 1997 to $7,97 billion in 2008, $8.98 billion in 2009, and to $10.8 billion in 2010.

J. Widjonarko, the agency?s Deputy Chairman for General Affairs, said that the figure would further increase in the coming years with the expected surge in the number of large exploration projects such as in the Banyu Urip field in the Cepu block, and deep water development in Makassar Strait as well as the gas field development in Masela?s Abadi block in East Natuna.

?The value of each project can reach $2 billion, and could be higher,? he said.

Widjonarko also said the agency could also save billions of dollars from the procurement as contractors are encouraged to share facilities with others whose oil and gas concessions are adjacent to each other or in the same area.

He said that in 2011, contractors saved $155.4 million or about Rp 1.4 trillion. Of the total, about $115.8 million were saved from the sharing of facilities and $39.6 million from the optimization of contractors? assets.

Under the existing production sharing contracts for oil the contractors receive 15 percent of the net production and 85 percent going to the state, and for gas the contrator gets about 35 percent of the net production, and remaining 65 percent for the government. Under this sharing scheme, all the spendings for exploration and production are covered by the governemnt.

Editing by Benget Besalicto Tnb.