September 11, 2015 / 11:20 AM / 4 years ago

Indonesia increases investor share for oil, gas blocks amid low oil prices

By Wilda Asmarini
    JAKARTA, Sept 11 (Reuters) - Indonesia is raising the share
of production on offer to oil and gas investors in its latest
auction of exploration assets, after a string of companies
relinquished assets following a more than 50 percent drop in oil
prices since June last year.
    Typically the production split is set at 15-85 for oil,
where 15 percent of output goes to the contractor and the rest
to the government. In the latest bidding round, companies are
being offered shares of up to more than double at 35 percent for
oil, upstream oil and gas director Djoko Siswanto said on
Friday. For gas, the share for the oil companies has been hiked
to 35-40 percent from 30 percent normally.
    "It's intended to attract investors (and) to make these
blocks attractive to develop and economically viable for
investment return," Siswanto told Reuters, referring to the
current drop in oil prices. 
    Siswanto added that tax holidays were also being offered to
sweeten deals. The government is easing its taxes on land and
buildings during the exploration period, and has simplified its
permits, he said. 
    Higher shares in oil and gas production are normally given
for exploration blocks in deepwater or that are judged to be
less prospective or high risk, but the latest offers exceed
this, Siswanto said, adding that the government would also be
"more flexible" in negotiating the equity split.
    This year majors ExxonMobil and BP have both
handed back exploration blocks to Indonesia, and Swedish
independent Lundin Petroleum has said it is exiting
the country.   
    ConocoPhillips said last month it is reviewing its
portfolio in Indonesia and was expected to soon seek buyers for
a stake its South Natuna Sea Block B operation. 
    Earlier this month Indonesia said it would offer 21 oil and
gas blocks, including 13 conventional ones, in 2016, up from 11
this year. 
    Indonesia's crude oil output peaked around 1.7 million
barrels per day in the mid-1990s and has fallen to nearly half
that as old fields have matured and died. The government has
been trying to revive the flagging production for years but has
had difficulty in attracting oil and gas investors, at least
partly because of regulatory uncertainty.
    Oil prices have fallen to less than $50 a barrel
since June last year, from a 2014 peak above $115, because of a
global crude glut and a shaky Chinese economy. 
    The following table shows the oil and gas blocks on offer in
the latest tender.
 Direct offers
 1   Southwest Bengara, onshore East Kalimantan
 2   West Berau, offshore West Papua
 Regular tenders
 1   Rupat Labuhan, offshore Riau & North Sumatra
 2   Nibung, onshore Riau & Jambi
 3   West Asri, offshore Lampung
 4   Oti, offshore East Kalimantan
 5   Manakara-Mamuju, offshore West Sulawesi
 6   Kasurill, onshore Papua
 Data from Energy and Mineral Resources Ministry

 (Writing by Fergus Jensen; Editing by Tom Hogue)
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