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A number of oil and gas giants including U.S.-based Chevron,
Exxon and ConocoPhillips, France-based Total and British-based Shell
and BP, are set to submit their bids in the government's next tender
for oil and gas exploration projects in the country, an official says.
Even though the auction will likely be opened in October, R. Priyono,
the energy ministry's director for the upstream oil and gas industry,
said Friday the big companies had submitted initial proposals, showing
their interest in particular blocks located in the deep seas of eastern
Indonesia.
Priyono said the most sought after block was the Semai block offshore
Papua, which had attracted several major oil companies such as Chevron,
Exxon, BP and Shell.
It is reported the block has a total potential reserve of 1 billion
barrels of oil equivalent.
Aside from placing bids under a regular tender mechanism, the companies
will also offer bids through a direct-offer mechanism.
Under such a mechanism, companies will first identify the blocks they
wish to develop and then the government will advertise it to see if
there are any rival bids.
Of the total 25 oil and gas blocks to be put on the table, 11 blocks
will be offered through a regular tender while the remaining 14 will be
under a direct-offer mechanism.
The companies that will go with the direct-offer mechanism include
Total, U.S.-based Hess and China's CNOOC, which are eyeing blocks in
the eastern part of Indonesia.
Energy and Mineral Resources Minister Purnomo Yusgiantoro has said the
government would consider providing a better production split to
encourage more investors to take part in the tender, realizing that
many of the blocks are located in remote areas.
The proposed production-sharing scheme would allow investors to gain as
much as 50 percent of the total revenue, he said.
Scheduled to be opened in August, the tender was delayed until October,
pending a discussion on the cost recovery system used in the country's
oil and gas industry, Priyono said.
"We hope there will be results in October, after which we will open the
tender as soon as possible," Priyono said.
He said by October the government was expected to be able to issue
clearer arrangements on cost recovery assessment, in which costs
unrelated to petroleum operations could not be recovered.
"Items such as personal expenses, which are not related to exploration
activities, will not be reimbursed by the government," Priyono said.
"To make things clearer, we will change the form from positive lists to
negative lists, instead of listing the things that are recoverable.
Under the new regulation, we will submit the things that can not be
recovered."
He said the new regulation would also apply to existing contracts with
the government, which would first discuss the new arrangements with oil
and gas operators and explain how they will change the cost recovery
assessment stated in their contracts.
Energy analysts have urged the government to issue clear-cut rules to
ensure the cost recovery system used in the country's oil and gas
industry does not cause losses to the state. The analysts have called
the existing system vague, saying it has too many gray areas that
enable operators to not only recoup all of their exploration and
production expenses, but also markup their spending in order to receive
bigger reimbursements.
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