The Energy and Mineral Resources Ministry will not re-tender the Semai V oil and gas block in West Papua, despite a protest from state oil and gas company PT Pertamina as a losing bidder.

"The decision is final. The contract has been signed," said the ministry's director general for oil and gas Evita H. Legowo Friday.

The Semai V block, with estimated gas reserves of 8 billion cubic feet, is the most contested block in the government's 2007-2008 oil and gas blocks regular tender. Six firms, including French oil giant Total E&P Indonesia, state oil and gas company PT Pertamina and Hess Corp, the fifth biggest U.S. oil producer, applied for exploration rights in this block.

Hess eventually won the block and pledged to invest US$143 million to back three years' exploration. It also committed to give the government a signature bonus of US$40 million.

Pertamina, who teamed up with Europe's biggest oil company Shell in bidding for the block, had expressed regret over the government's decision and sent an official complaint to the Energy and Mineral Resources Ministry.

In its statement on Thursday, Pertamina said the company deserved to win the block because it offered a bigger investment commitment for the development of the block. Pertamina said it offered an investment commitment of $252.26 million plus a signature bonus of $15 million.

"Although Pertamina did not offer a bigger signature bonus, we did offer a better technical proposal which in the long term would have brought more benefit for the country," Pertamina's spokesperson Anang Rizkani Noor said in a statement.

Evita said the government chose Hess, not because of the company's proposed bigger signature bonus, but because it showed better technical planning.

"Hess's plan is more realistic and this is important because it will impact the cost recovery reimbursement. Pertamina's plan is less efficient in this case," she said.

Cost recovery reimbursement is a scheme when the government replaces exploration and exploitation costs the block operator has spent once the block enters the production stage -- a sort of incentive to help bolster investment in the oil and gas sector.

State Minister for State Enterprises Sofyan A. Djalil, however, took the side of Pertamina, saying he was disappointed at the decision and that he had sent a letter to the Energy and Mineral Resources Ministry stating his dissatisfaction.

"I can't understand why they did not win. How can Pertamina become a major company if this keeps happening?" Sofyan said. (dis)

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