BP Eyes Indonesian Papua Exploration

The New York Times

By REUTERS, February 3, 2010, 1:05 a.m. ET

JAKARTA (Reuters) - BP is eying a new oil and gas exploration area in Indonesia's West Papua province near Tangguh to boost reserves, an official at the Indonesia energy ministry said on Wednesday.

"BP has an intention to explore oil and gas in a new area in Western Papua and it has submitted its request. We welcome their intention and we are now studying their proposal," Edy Hermantoro, a director at the ministry, told Reuters.

An official of BP's Indonesia unit confirmed the company intended to expand its area in West Papua but gave no further details.

BP Indonesia is the operator of the Wiriagar, Muturi and Berau blocks in West Papua, which together have combined reserves of 14.4 trillion cubic feet (tcf) of gas.

Another Indonesian energy ministry official, who declined to be identified, said proven plus probable and possible reserves in West Papua's Tangguh were estimated at around 23 trillion cubic feet of gas.

In December last year, Indonesia offered a new tender for 24 oil and gas blocks as part of efforts to boost investment and lift dwindling production.

The areas include blocks in West Berau, offshore of Bintuni, West Papua. This area is near to BP Indonesia's current operation.

In Indonesia's most recent tender, which was for 31 oil and gas blocks, six blocks were awarded to foreign and local companies including Canadian oil firm Talisman Energy Inc and Canadian Niko Resources . The remaining blocks received no expressions of interest from investors.

Indonesia has said it will offer new incentives to oil and gas investors, including more favourable tax treatment and production splits, in order to encourage exploration and stem a steady decline in production. But industry players have said the incentives are not enough.

Indonesia's proven and potential oil reserves have dropped to 8.3 billion barrels, from 9.6 billion barrels in 2001.

(Reporting by Muklis Ali; Editing by Neil Chatterjee)