Indonesian Government Opens 4 New Blocks for Oil, Gas Exploration

Jakarta Globe, Ririn Radiawati Kusuma | November 18, 2010

Jakarta. Indonesia, Southeast Asia’s largest economy, has awarded four oil and gas blocks to local and foreign companies, including BP Exploration Indonesia, a unit of oil major BP, a government official has confirmed.

Indonesia has awarded four oil and gas blocks to local
and foreign companies. (AFP Photo)

As much as $28 million was expected to be spent on exploration activities in the newly opened blocks, including $4.2 million going straight to the government for so-called signature bonuses, Evita Legowo, director general of oil and gas at the Ministry of Energy and Mineral Resources, said on Thursday.

Aside from BP Exploration Indonesia, the other companies awarded the oil and gas blocks were Ephindo Oil and Gas Holding, the Awe Consortium and Mitra Energy.

BP Exploration Indonesia is set to spend $3.4 million on exploration in the North Arafura block in Papua.

Ephindo was granted rights to explore the North Sokang block in Riau, with an investment plan totaling $10.2 million.

The Awe Consortium, which consists of Baruna Recovery Energy and Sillo Maritime Perdana, was awarded the Titan block in Java, although no details were provided about which provinces would be covered by the project.

Its total investment is estimated at $8.3 million.

Mitra Energy is set to explore the Bone block in South Sulawesi, with a total investment of $6.1 million.

“The companies have three years to explore the oil and gas potential of those blocks,” Evita said.

Indonesia has so far this year awarded 42 blocks across the country for exploration.

While the North Sokang block is estimated to hold 600 billion cubic feet of gas, and the Titan block is believed to hold 300 bcf, Evita said the companies might find more oil and gas reserves in those blocks.

The newly opened blocks are expected to help the country meet its increased oil production targets over the coming years.

The government had hoped to see oil production reach 965,000 barrels per day for the year.

But a number of recent incidents, including a major leak in a pipeline operated by Transportasi Gas Indonesia at the end of September that caused disruptions to about 20 percent of the nation’s total production capacity, have made reaching the ambitious target all but impossible.

Chevron Pacific Indonesia’s Duri oil field in Riau also stopped production in October after one of its pipelines burst. CPI accounts for some 40 percent of the nation’s total oil output.

Oil production is now forecast to reach an average of 955,000 bpd for the year, lower than the 2010 state budget target, Evita said in September.

Indonesia has been struggling to attract foreign investment to develop new oil and gas fields.

Although it has offered incentives, including favorable tax treatment and production sharing, an uncertain regulatory environment has hampered investment in the sector.