TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Oil, gas firms dump Indonesian assets
Foreign oil and gas players are dumping their Indonesian assets as they are considered less competitive than other assets elsewhere in the world during a difficult time when exploration may not produce any yields
Change Size
Foreign oil and gas players are dumping their Indonesian assets as they are considered less competitive than other assets elsewhere in the world during a difficult time when exploration may not produce any yields.
At least four foreign companies have returned ownership of their blocks to the government or are finalizing to do so, according to the Energy and Mineral Resources Ministry.
The companies are UK-based oil and gas exploration company Ophir, Swedish Lundin, Australia-based Cooper Energy and French GDF, which is now known as Engie.
Total E&P Indonesie and Japanese oil and gas company Inpex, on the other hand, are still undecided on their future participation in the gas-rich Mahakam block, the contract for which is set to expire in 2018.
The block will be handed over to state-owned Pertamina after the ownership period expires.
Djoko Siswanto, the Energy and Mineral Resources Ministry’s director for the upstream oil and gas business, said two factors had pushed the companies to dump their assets. First, they were unsuccessful after years of drilling and second, their priority lists did not allow them to continue exploration.
Djoko acknowledged that in such a difficult time as now, with low oil prices and little capital, companies tended to prioritize areas that already contained reserves.
“These companies have blocks not only in Indonesia, but also in other Asian countries as well as in Europe. So they are choosing to focus on other blocks instead,” Djoko told The Jakarta Post on the sidelines the 40th Indonesian Petroleum Association Convention and Exhibition (IPA Convex) on Friday.
Global oil prices have been in free fall for the past two years. The price of Brent dropped to below US$50 per barrel from $110 per barrel in June 2014.
It is only recently that Brent has again touched $50 per barrel.
The low prices have resulted in massive layoffs and have halted expansion projects in many countries, including in Indonesia.
The situation has left the government scrambling to attract investors by offering new incentives in its latest bidding round, in which it offers exploration opportunities in 15 blocks across the country.
The announcement of the 15 offshore and onshore blocks was made at the IPA convex.
They are located in Riau, Jambi, the Makassar Strait, East Kalimantan, Central Kalimantan, Java Sea, South Sulawesi, West Sulawesi, West Papua and Southeast Sulawesi.
Under the new tender scheme, participants will determine the production split and signature bonus, as opposed to the previous scheme that saw the government set fixed figures for both production split and bonus.
However, finding investors may still be difficult because in 2015, nine oil and gas blocks were put up for tender, but none gained a winning bidder.
A 2016 survey by multinational service network PricewaterhouseCoopers seems to validate the weak business sentiment.
The survey’s results reveal that while most respondents think Indonesia’s oil and gas demand will moderately increase over the next five years, 61 percent respond negatively when asked whether or not their companies will increase exploration activities in Indonesia in the next three years.
Djoko said he was certain this year’s tender would attract investors and that no more firms would dump their assets as oil prices were gradually increasing.
Meanwhile, Ophir Energy human resources and general affairs vice president Marudut Manullang said the upcoming tender would be a test case to see whether or not this new scheme offered by the government could attract investors.
_______________________________________
To receive comprehensive and earlier access to The Jakarta Post print edition, please subscribe to our epaper through iOS' iTunes, Android's Google Play, Blackberry World or Microsoft's Windows Store. Subscription includes free daily editions of The Nation, The Star Malaysia, the Philippine Daily Inquirer and Asia News.
For print subscription, please contact our call center at (+6221) 5360014 or subscription@thejakartapost.com
