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Govt to auction more oil, gas blocks this year
The Energy and Mineral Resources Ministry will tender 10 oil and gas blocks in a new bidding round this year to supplement new working contracts secured earlier this year in a bid to increase output despite a waning investment-appetite
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The Energy and Mineral Resources Ministry will tender 10 oil and gas blocks in a new bidding round this year to supplement new working contracts secured earlier this year in a bid to increase output despite a waning investment-appetite.
The blocks are spread across the archipelago, comprising four conventional blocks to be tendered through open bidding; another four under a direct-appointment scheme to oil and gas contractors that have performed studies in respective areas; as well as two unconventional shale blocks.
'We are in the preparation stage and will start the new bidding round soon,' the ministry's oil and gas director general, IGN Wiratmaja Puja, said.
Despite an expected slowdown in investment in the oil and gas sector due to the low global oil prices that has squeezed profit margins, Indonesia succeeded in securing new contracts for 13 blocks on Friday.
The 13 new contracts were signed on the last day of the 39th Indonesian Petroleum Association (IPA) Convention and Exhibition, with a combined investment commitment of US$166.3 million, excluding $14.5 million in total signing bonuses, which is a one-time fee paid by contractors for the signing of a production-sharing contract (PSC).
Contracts for 11 of the 13 blocks were awarded earlier this year after 21 blocks were tendered in 2014 through open biddings.
Energy and Mineral Resources Minister Sudirman Said described the contract-signings as a positive signal for the oil and gas industry amid the lingering pressures of low oil prices.
'We are in energy crisis but we continue to work,' the minister said.
Indonesia has been struggling under the financial strain of growing imports of oil and petroleum products, as domestic production can no longer keep up with demand. As the country is estimated to become a net energy importer by 2019, the government has been pushing efforts to up output by encouraging companies to focus on explorations to find new hydrocarbon reserves.
However, while explorations are often hampered by bureaucratic issues, the challenge of low global oil prices has also forced oil and gas contractors to reconsider investment in high-risk countries such as Indonesia.
Global oil prices have fallen by half, from around $110 at the end of last year to $55 in the beginning of 2015. But even with the recent jump to around $65 recently, investors are expected to wait-and-see to pour their funds into the field.
Investment interest in Indonesia's oil and gas sector has been on the wane in recent years, despite the country's significant potentials. In 2012, 25 new oil and gas contracts were signed. A year later, the number dropped to 14 and further declined to just seven in 2014.
A survey conducted by PwC Indonesia showed that investment appetite in the oil and gas sector had stagnated. Based on the survey, as many as 36 percent of respondents said there would be no change in capital spending for Indonesian reserve acquisitions, with 12 percent expecting a decrease.
'Future capital spending is expected to slow, particularly for exploration. Some survey participants indicated that the price decrease has led to all exploration activities being postponed,' the report noted.
