Govt seeks to revise oil, gas contracts amid high oil prices

Ika Krismantari , The Jakarta Post , Jakarta | Tue, 02/19/2008 11:40 AM | Business

With soaring oil prices, which translate into higher revenues for oil producing firms, the government said it would attempt to renegotiate contracts with oil and gas operators in the country.

Energy and Mineral Resources Minister Purnomo Yusgiantoro revealed on Monday his plan to change the terms and conditions in the existing production sharing contracts, as had been requested by the House of Representatives' Commission VII on energy and mineral resources.

The commission has urged the government to review existing oil and gas contracts to anticipate higher oil prices in the future -- a move which has been carried out by other oil producing countries, including Venezuela, Bolivia and Ecuador.

The House said the proposal was aimed at increasing the state's earnings from the oil and gas sector.

Purnomo said during the hear the government was studying a new mechanism which would apply a calculation on a production split scheme based on the change in productions and prices.

Should it be approved by the operators; the government will also propose a better price for deliveries of Liquefied Natural Gas (LNG) to buyers.

He said any changes in the contract would be subjected to renegotiations with oil and gas companies.

Aside from this plan, Purnomo said in the hearing that this year's oil production will exceed the government's target of 910,000 barrels per day (bpd) due to an unexpected output in some fields.

He said he was optimistic oil output would be at above one million bpd level this year.

For gas production, he forecast a 7.2-percent increase in the gas output this year to 8.15 billion cubic feet per day.

The government also aims to import 19 million kiloliters (kl) of fuel products this year, 11.2 percent lower than 2007's import figures due to the ongoing kerosene-liquefied petroleum gas (LPG) conversion program.

To further reduce the import of fuel products, Purnomo said the government, in cooperation with a number of investors, wanted to build new refineries.

At present, the country has 10 operating refineries with a total capacity of 1.15 million barrels of oil per day.

Purnomo said that currently five investors were in the process of constructing five new refineries with a total capacity of two million barrels of oil per day.

Nine other projects, with a combined capacity of 1.35 million barrels of oil per day, are still waiting for approval from the government.

Indonesia still needs to import about 400 million barrels of oil per year to meet a national demand of 1.4 million barrels.

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