Number of Oil and Gas Wells is Key to Winning Tenders

The government is planning to put several oil and gas blocks up for tender this year. To win these tenders, oil and gas contractors will have to meet several terms and criteria. 

The Energy Ministry’s Business Development Director for the Upstream Oil and Gas Sector Djoko Siswanto said that as well as offering the greatest contribution to the country, investors must make a commitment to drill the wells. A commitment to explore wells for the first three years is the most determining criteria in the tenders.

So, if contractors want to get a high score, they must demonstrate a strong commitment to drill oil and gas wells. The more wells the contractor plans to drill, the higher its score, which means they stand a better chance of winning the tender. “The winner of the tender will be the bid that offers the most benefit to the state,” Djoko told Katadata, Thursday (21/4). (Read: Government to Allow Oil and Gas Contractor to Extend Exploration Phase)

The ministry’s director general for oil and gas affairs IGN Wiratmadja Puja said that these tenders are different because changes have been made to the terms and conditions of the contracts. To keep contractors interested in investing in Indonesia’s oil and gas sector, they will now be allowed to propose their preferred profit share. 

Wiratmadja said that as a result of the crash in global oil prices, the government needs to give incentives to oil and gas contractors. So, investors will be treated differently, depending on the challenges they are up against. “For example, if geological conditions are difficult, they will be allowed to propose their preferred share; but if these conditions turn out not to be so difficult, the share might change. “ The further east, the more difficult the blocks, so they will be eligible for more flexible profit-sharing schemes,” Wiratmadja said. 

The tenders will be announced next month, to coincide with 40^th IPA Convention and Exhibition 2016 on 25-27 May in Jakarta. The theme of this year’s annual meeting of oil and gas industry players in Indonesia is Shifting Paradigms in Indonesia, Supplying Energy in the New Reality. (Read: SKK Migas will Complete Oil and Gas Block Termination Process Soon)

Of the 14 oil and gas blocks up for tender this year, 11 are conventional blocks and three are unconventional blocks. The conventional oil and gas blocks are the South CPP Block, Suramana 1 Block, South East Mandar Block, North Arguni Block, Bukit Barat Block, Batu Gajah Dua Block, Kasongan Block, Ampuh Block, Ebony Block, Onin Block, and West Kamana Block. The three unconventional blocks are the Batu Ampar Block, and the Bunga Mas and Raja coal bed methane blocks. 

Vice president of the Indonesian Petroleum Association (IPA) Ignatius Tenny Wibowo previously said that amid the current low global oil prices, contractors need support from stakeholders in the oil and gas sector, especially the government. Incentives are necessary to promote oil and gas investment. These incentives include a moratorium on the current 10-year exploration phase, as well as the changes to make production-sharing contracts more flexible. (Read:Head of Aceh Oil & Gas Regulator Wishes to Increase Exploration)

The government can stop the incentives when global oil prices recover to a certain level. In the long term, associations of oil and gas companies hope that the government can remove barriers such as land acquisition difficulties, the complicated procedure for acquiring business licences, the unfriendly taxation system, ambiguous cross-sector regulations, and criminalisation of oil and gas industry players.