More oil, gas blocks to be offered in 2007

Ika Krismantari, The Jakarta Post, Jakarta

To bolster oil and gas prospecting in the under-explored eastern part of Indonesia, the government will offer 30 new oil and gas blocks later this year, mostly located in the deep waters of Papua and Nusa Tenggara.

R. Priyono, the energy ministry's director for the upstream oil and gas industry, said Monday that the government would also offer a package of incentives, including a flexible commitment for investors.

"If after only two or three years of exploration they consider the area unpromising, they could return the rights to the government," Priyono said.

Currently, companies are usually granted six-year exploration rights.

The 30 blocks, he said, would be offered through a regular tender and direct offer mechanism, scheduled to start in May or June.

Priyono added that in February the government would announce the results of 20 tenders held in August last year.

The areas put on the table last year included new blocks in Madang, South Mandar, Sageri and South Sageri, which are all off the South Sulawesi coast, as well as the Enrekang block in onshore South Sulawesi and three new offshore blocks in West Sulawesi: Karama, Malunda and Mandar.

Several major energy companies, including state oil and gas firm Pertamina, U.S.-based Chevron, and France-based Total participated in the process.

In a bid to boost the country's declining oil production, Indonesia has been soliciting private investors for oil and gas exploration activities since 2001, mostly via tender.

There have been a total of 86 new production-sharing contracts since 2001. The latest were signed last December, when the government awarded exploration rights over new oil blocks to 18 companies through a direct offer mechanism.

Among the winners at that time were a consortium of the third-biggest U.S. oil firm, ConocoPhillips, with Norway's Statoil ASA, which won the Kuma block in western Sulawesi. China's largest offshore oil producer, CNOOC, claimed the Batanghari block in central Sumatra.

Indonesia, once a major oil producer in the Organization of Petroleum Exporting Countries (OPEC), has suffered a major decline in its oil output over the past several years because of aging fields and a lack of new exploration. The country is now a net oil importer.

The government is targeting production of 1.3 million barrels of oil per day (bopd) by 2009, compared to the current 1.06 million bopd.