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Indonesia’s Oil and Gas Block Offerings Fail To Excite Investors

Offshore

Indonesia offered on Friday 10 conventional and 5 unconventional oil and gas blocks under new, more flexible terms for production sharing deals, but it is still failing to attract much interest from international upstream companies.

Indonesia has tweaked its production sharing rules and will try to reduce import duties on equipment for exploration where possible, deputy energy minister Arcandra Tahar told Reuters.

In the 2016 tender, Indonesia offered 17 blocks, but picked just one winner. According to Tahar, the feeble interest last year was not due to Indonesia’s unattractiveness as an oil exploration destination, but to the combination of the low oil prices and company strategies.

However, oil industry analysts and executives who spoke to Reuters still think that Indonesia needs to do more work in terms of regulatory and fiscal regimes.

In Indonesia at the moment, the returns are difficult, the time to get a return is too long, and the risk of political involvement is quite high,” Andrew Harwood, director of Asia Pacific upstream oil and gas research at Wood Mackenzie, told Reuters.

According to an executive at an international oil company with operations in Indonesia, the country is less competitive than other destinations.

Production is going down in oil and gas, while a lot of countries are increasing, so I think that says it all,” the executive told Reuters.

Related: Oil Prices Set To Rise On Back Of OPEC Deal Extension

Indonesia is planning to bring in US$200 billion in new oil investment as local production declines and demand grows.

Indonesia is currently producing some 800,000 barrels of crude daily – about half of what it consumes – but this is expected to climb to over 1 million bpd, to reduce the country’s dependence on imports, which are estimated to have reached 8.4 million barrels in April. Over the first quarter, Indonesia’s average monthly import rate was 10.55 million barrels.

By Tsvetana Paraskova for Oilprice.com

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