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Govt confident oil, gas blocks will attract investors
The government has decided to put six oil and gas blocks up for auction despite several of the blocks not attracting successful bids previously
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he government has decided to put six oil and gas blocks up for auction despite several of the blocks not attracting successful bids previously.
The bidding process kicked off on Tuesday with documentation available to potential investors.
Energy and Mineral Resources Ministry Oil and Gas Director General Djoko Siswanto said on Monday the ministry was confident deals would be made on the six blocks as potential investors were available and the data on reserves in each block was sufficiently attractive.
Regarding exploration blocks, Djoko said data on the planned production rate would come from the bidders and would be used to decide the winner.
“There are three exploration blocks, namely, Banyumas, Andika Bumi Kita [ABK] and Southeast Mahakam that actually have attracted lots of investors. But they needed further time to evaluate the blocks,” he said, referring to the first auction that ended on July 3.
Those three blocks are included in the 19 exploration blocks that the government has chosen to auction this year. However, as of July 3 investors had accessed the documents of only five blocks, namely Air Komering, Bukit Barat, Andika Bumi Kita, Southeast Mahakam and Ebuny.
The government decided to take down Air Komering, Bukit Barat and Ebuny as Djoko said those blocks needed further evaluation as well as requiring additional data.
Banyumas Block, which is located in West Java, will be auctioned later as the government has set a minimum signature bonus of US$500,000 and a minimum three-year geological and geophysical exploration commitment.
“We believe that the Banyumas Block has potential reserves of 45 million barrels of oil equivalent,” Djoko added.
Meanwhile, it is likely to be easier for the government to seal a deal with onstream blocks as existing data on potential reserves are available, which will help investors to assess how economical the block is.
Three of the onstream blocks are South Jambi B, Makassar Strait and Selat Panjang, the former two are set to expire in 2020 and the latter will expire in 2021. The three blocks are part of 23 onstream blocks that the government has targeted to finalize by year-end, new contracts for 12 had been signed as of July.
“Selat Panjang’s existing operator, Petroselat Ltd., the subsidiary of publicly listed energy firm Sugih Energy, is in bankruptcy, so the firm cannot continue the operation,” Deputy Energy and Mineral Resources Minister Arcandra Tahar previously said.
Production at the block stopped last February with its last rate being below 1 barrel of oil per day. However, its proven reserves stand at 4.3 million barrels.
South Jambi B stopped production two years ago as the existing operator US-based energy firm ConocoPhillips stated the block had become uneconomical, even though it has proven reserves of gas of 217.2 billion standard cubic feet (bscf).
The upward trend in the oil price, which has been hovering at $70 dollar per barrel since January from the lowest point of $44.82 per barrel last year, is expected to boost upstream investment.
However, in the first half of 2018, oil and gas sector investment only amounted to $3.9 billion, 27 percent of 2018’s target of $11.9 billion.
“The increasing oil price is an incentive [for upstream investment], but there are unresolved issues such as a lack of infrastructure in eastern Indonesian, which will heighten the cost structure to operate any block,” Jakarta-based mining research group ReforMiner Institute’s executive director Komaidi Notonegoro said recently.
