The Indonesian government, seeking international investment to boost the country’s falling output of oil, has released 24 new oil and gas blocks for exploration and production contracts.
Evita Legowo, director general at Indonesia’s energy ministry, said 17 of the blocks will be offered through tenders, while the remaining 7 blocks will be offered directly. Proposals for direct appointments will be accepted until July 30 and tender bids may be submitted until Oct. 13.
The 17 blocks offered under regular tender are: Tomini Bay I-V; Gorontalo Tomini I-II; North Bone; Kolaka Lasusua; Kabena; Jampea; Buton III; Menui Asera; Morowali; Sula I-II, and Bird’s Head. The 7 blocks offered directly include: Kubu; North East Ogan Komering; Offshore West Java; Blora; North Makassar; East Simenggaris; and Digul.
Expected revenue
Legowo said the government expects to earn at least $56.5 million in signing bonuses from the 24 new oil and gas blocks, with a different minimum signing bonus for each block, depending on the size of potential reserves.
“If the early survey found the indication that the blocks have big reserves, then government sets a higher minimum signing bonus,” said Legowo, who added that minimum signing bonuses range from $1 million to $5 million.
The Tomini Bay I-V and Gorontalo Tomini I-II blocks stand out as the most expensive, with the highest minimum signing bonus of $5 million on each of them due to their potentially high reserves of oil or gas.
“We set the highest minimum signing bonus for these blocks, because the areas are very promising,” Legowo said. “We estimate the blocks contain huge reserves, especially gas reserves.”
According to analyst Global Insight, “the [Indonesian] government recently put proven and probable reserves of oil and gas at 8.2 billion bbl and 170 tcf, respectively, which suggests the results of exploration could be positive.”
Eastern basin costs
Most of the blocks offered are in the eastern part of Indonesia, and Legowo said the government asked for a lower production split for those blocks due to the higher costs involved.
“The split is 65% for the government and 35% for contractors,” said Legowo, who noted that the government normally takes 80-85%.
The reduced government share should be seen as an incentive for oil and gas companies to operate in the more difficult conditions in eastern part of Indonesia, Legowo said.
According to Edy Hermantoro, director of oil and gas upstream watchdog BPMigas, the average drilling cost for a wildcat well off eastern Indonesia can reach $40-50 million, while in western Indonesia the cost is $7-8 million.
Boosting oil output
The release of the 24 blocks coincides with government efforts to boost oil output in the face of a recent downward trend over the past 5 years.
Jakarta has set a production target of 960,000 b/d for this year, but as of April, production has been slightly lower at 956,000 b/d, Legowo said.
The 24 blocks and their locations, generally from west to east, are:
- Kubu, off central Sumatra.
- North East Ogan Komering, onshore South Sumatra.
- West Java, off West Java.
- Blora, onshore Central Java.
- East Simenggaris, off East Kalimantan.
- North Makassar, in the Makassar Strait.
- Tomini Bay I, II, III, IV, and V, off north-central Sulawesi.
- Gorontalo Tomini I and II, off North Sulawesi.
- Buton III, North Bone, Kolaka Lususua, Kabena, and Jampea, off South Sulawesi.
- North Sulawesi Menui Asera and North Sulawesi Morowali, off southeast Sulawesi.
- North Sulawesi Sula I and II, off Moluccasp.
- North Sulawesi Bird’s Head, off West Papua Province.
- Digul, onshore Papua Province.
