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Indonesia increases investor share for oil, gas blocks amid low oil prices

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Indonesia is raising the share of production on offer to oil and gas investors in its latest auction of exploration assets, after a string of companies relinquished assets following a more than 50 per cent drop in oil prices since June last year.

[JAKARTA] Indonesia is raising the share of production on offer to oil and gas investors in its latest auction of exploration assets, after a string of companies relinquished assets following a more than 50 per cent drop in oil prices since June last year.

Typically the production split is set at 15-85 for oil, where 15 per cent of output goes to the contractor and the rest to the government. In the latest bidding round, companies are being offered shares of up to more than double at 35 per cent for oil, upstream oil and gas director Djoko Siswanto said on Friday. For gas, the share for the oil companies has been hiked to 35-40 per cent from 30 per cent normally.

"It's intended to attract investors (and) to make these blocks attractive to develop and economically viable for investment return," Mr Siswanto told Reuters, referring to the current drop in oil prices.

Mr Siswanto added that tax holidays were also being offered to sweeten deals. The government is easing its taxes on land and buildings during the exploration period, and has simplified its permits, he said.

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Higher shares in oil and gas production are normally given for exploration blocks in deepwater or that are judged to be less prospective or high risk, but the latest offers exceed this, Mr Siswanto said, adding that the government would also be"more flexible" in negotiating the equity split.

This year majors ExxonMobil and BP have both handed back exploration blocks to Indonesia, and Swedish independent Lundin Petroleum has said it is exiting the country.

ConocoPhillips said last month it is reviewing its portfolio in Indonesia and was expected to soon seek buyers for a stake its South Natuna Sea Block B operation.

Earlier this month Indonesia said it would offer 21 oil and gas blocks, including 13 conventional ones, in 2016, up from 11 this year.

Indonesia's crude oil output peaked around 1.7 million barrels per day in the mid-1990s and has fallen to nearly half that as old fields have matured and died. The government has been trying to revive the flagging production for years but has had difficulty in attracting oil and gas investors, at least partly because of regulatory uncertainty.

Oil prices have fallen to less than US$50 a barrel since June last year, from a 2014 peak above US$115, because of a global crude glut and a shaky Chinese economy.

REUTERS

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