Wiratmaja: there are no winners in block tender

By Febry Silaban

The low oil prices have affected the latest tender of oil and gas block held by the government. Director General of Oil and Gas IGN Wiratmaja announced on Tuesday that of the eight conventional blocks offered by the government in the tender announced on Sept. 10, 2015, there were only two blocks which attracted investors.

Wiratamaja said the government has even declined to award the blocks to the interested bidders because they failed to meet the requirements.

In the tender, the government offered two new blocks through direct-offer tender mechanism, namely West Berau PSC located offshore West Papua province and Southwest Bengara PSC (onshore East Kalimantan province); and six new blocks through regular tender mechanism, namely Rupat Labuhan PSC (offshore Riau and North Sumatra provinces), Nibung (onshore Riau and Jambi provinces), West Asri PSC (offshore Lampung province), Oti PSC (offshore East Kalimantan province), North Adang PSC (offshore East Kalimantan province) and Kasuri II PSC (onshore Papua province). The two blocks offered through direct offer mechanism are results of joint studies.

Until the deadline of Oct. 26, 2015, there wasn?t any company submitting bids for any of the two blocks offered through the direct offer mechanism, while some companies accessed the data and bid documents. ?As for the regular tender, until the deadline of Jan. 14, 2016, there were only two firms submitting participating documents, namely Azipac Limited for Oti block and PT Agra Energi Indonesia for Kasuri II block,? he said.

For Southwest Bengara PSC, the government set production split at 70:30 for oil and 65:35 for gas with contractor obligations including carrying out 2D seismic survey and paying a signature bonus of US$1 million. For West Berau PSC, which is considered a high-risk potential, the production split was set at 65:35 for oil and 60:40 for gas with contractor obligations including carrying out 3D seismic survey, drilling one exploration well and paying $1 million signature bonus.

Based on responses of investors, the government concludes that the two blocks are interesting technically, but the terms and conditions were sub-economic in view of the current market condition.

As for the blocks offered the regular tender, production split for Oti block was set at 65:35 for oil and 60:40 for gas with contractor obligation including carrying out G&G study, drilling one exploration well and paying a signature bonus of at least $1 million. Meanwhile, production split for Kasuri II block was set at 65:35 for oil and 60:40 for gas with contractor obligation including carrying out G&G study, drilling one exploration well and paying a signature bonus of $5 million. Since the companies which were interested in Oti and Kasuri II offered bids below the minimum requirements, the government has decided there are no winners in the block tender, Wiratmaja said.

?Amid the low oil price environment, the terms and conditions offered by the government have not yet met the economic requirements of tender participants As a result, there were participants who resigned,? Wiratmaja said.

Pursuant to the Minister of Energy and Mineral Resources Regulation No. 35/2008 on Procedures in Determining and Offering Oil and Gas Working Areas, the eight blocks will be placed in the ?available status?. After evaluating the terms and conditions and market condition, the government will re-offer the blocks through regular tender mechanism this year with ?open bid split? model, meaning investors may bargain for a production split in line with their economic requirements, Wiratmaja said.

Editing by Johannes Simbolon