Indonesia to Sign Fewer Oil, Gas Contracts This Year
Year 2011 was tough in terms of investment in the oil and gas industry, but judging from the government’s New Year’s resolution, 2012 is going to be even worse, with fewer oil and gas production sharing contracts expected to be signed.
The Energy and Mineral Resources Ministry has targeted to sign 20 oil and gas contracts this year as opposed to the 27 contracts signed last year. This year, however, the ministry expects to sign contracts for 10 coalbed methane (CBM) blocks.
“The next year’s target [2012] is slightly lower because in 2011, from the target of 30 blocks, we could only have 27 taken. That’s why the target in 2012 is set lower,” Ministry’s director general for oil and gas Evita Legowo told reporters in Jakarta over the weekend.
Evita said the contracts would be offered through direct appointment and regular tendering processes. She said that most of the blocks offered through regular tenders were located in the eastern part of the country, while for direct offers, the locations were scattered nationwide. Many experts and contractors say, most of the country’s potential reserves are located in deep water areas in eastern Indonesia.
In the downstream industry, President Susilo Bambang Yudhoyono has mandated that the memorandum of understanding (MoU) for the development of a refinery in Tuban, East Java, with Saudi Arabia-based Aramco should be signed in mid-January. The refinery will have a total capacity of 300,000 barrels of oil per day (bpd).
“We’re now looking for land, because available land is not sufficient for the petrochemical compound that will be built together with the refinery. Aramco will supply 250,000 bpd of crude oil to the refinery, while we’ll seek the additional 50,000 bpd from other suppliers,” Evita said.
For the expansion of the Balongan field in West Java, the Finance Ministry is currently processing requests from Kuwait Petroleum Corporation to provide more incentives. The ministry has actually agreed to give the company a tax holiday, lower income taxes and tax-free imports for certain chemical products. However, the investor deemed the offers are insufficient and has demanded more.
This year, the government will concentrate on executing its plan to limit the distribution of subsidized fuels, which was rejected by the House of Representatives last year. The plan will be followed by the conversion of oil-based fuels to gas-based fuels.
“I hope that the revision of the 2006 presidential regulation on fuel prices can be signed by the President in January. After the revision, we’re going to propose the limitation model to the House,” Evita explained.
The proposal was rejected by the House last April year on the basis that it lacked data on the policy’s economic and social impacts as well as a lack of prepared infrastructure.
As reported by this paper on Dec. 24, Pertamina claimed that it would be ready to implement the ban for private cars to buy subsidized fuels in April 2012 starting in Java and Bali as planned by the government.
The company reported that out of 3,061 fuel stations in Java and Bali, 2,065 of them have sold non-subsidized fuels, 700 stations just needed to switch the tanks from storing subsidized fuels to non-subsidized fuels and 296 stations required new investment.
Source: Jakarata Post