JAKARTA, May 15, 2010 (Xinhua News Agency) -- Indonesia's Energy Ministry officials said that the government had awarded drilling rights in 14 oil and gas areas in a tender, declaring the results a "relief" after similar tenders last year failed to attract any bidders, local media reported here on Saturday.
The successful tender came after the government dropped a proposal to limit cost-recovery by oil and gas companies in late April. Last year, tenders for 17 blocks went largely ignored by investors, many of whom cited uncertainty over government proposals to limit cost-recovery expenses as a factor.
Cost-recovery is a process whereby contractors are reimbursed for expenses incurred in the development and operation of the block.
International firms including Spanish giant Repsol, Canada's Talisman Energy (NYSE:TLM) (TSX:TLM) and Thailand's PTT Exploration and Production were among those awarded drilling rights. Local companies winning rights included PT Sargas & Vega and PT Cakra Nusa Darma.
The tenders come as the nation struggles to reverse its declining oil production, a phenomenon which saw it drop out of the Organization of Petroleum Exporting Countries in 2008.
Late last month, just after the government reversed its stance of cost recovery, a survey released by PricewaterhouseCoopers showed that the country was "losing its shine" for oil and gas investors.
Edy Hermantoro, director of upstream oil and gas at the Energy Ministry, said scrapping the plan to cap cost recovery helped attract bidders.
"I am sure it affected the result since capping on cost recovery is closely related to their investment," he was quoted by the Jakarta Globe as saying.
The investor interest demonstrated that Indonesia remained an attractive destination for oil and gas investment, Edy said.
Evita Legowo, director general of oil and gas at the Energy Ministry, cited the global economic recovery as the reason for investors' more enthusiastic response this year.
"It's such a great relief for our country compared to what happened last year when investors shied away from our tenders," Evita said on Friday.
Edy said the government plans to open its next tender on Wednesday with 34 oil and gas blocks to be on offer. Most of the fields will be in eastern Indonesia, an area with high reserves but also higher exploration risks necessitating larger investments.
Of the recently-awarded rights Repsol and US-based Black Gold Gas & Oil won the rights to explore and develop the Cendrawasih Bay III and IV blocks, respectively, off West Papua. Repsol is partnering with Canada's Niko Resources (TSX:NKO) to develop the Cendrawasih Bay II block.
PTTEP and Talisman won the rights to jointly develop the South Mandar, South Sageri and Sadang blocks off Sulawesi. PTTEP also won the rights to the Malunda block, in the Makassar Strait.
Local firm Sargas & Vega won the drilling rights for the onshore Puri block in South Sumatra, while Cakra Nusa Darma won the rights to onshore Sakakemang block, also in South Sumatra.
A consortium of Black oil subsidiary Komodo Energy and Niko Resources won the rights to the offshore Sunda Strait I block, off West Java. A consortium of PT Baruna Nusantara Energy and Australian Worldwide Exploration won the rights to the offshore North Madura block off East Java.
Source: www.istockanalyst.com
