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Indonesia Asks Chevron, Conoco to Consider Extending Oil Licenses

Refinery

The Indonesian government has approached Chevron and Conoco with an offer to consider extending their licenses, which expire in a few years, as part of efforts to boost domestic crude oil production.

Chevron has been present in Indonesia since 1924 and is currently responsible for 40 percent of the country’s oil output, which makes it the biggest single producer of crude. The Energy and Mineral Resources Minister of Indonesia has asked the company to consider how it is going to proceed with its local operations beyond 2021, when its license expires.

ConocoPhillips, which suspended operation at its South Jambi gas field two years ago, has been asked to consider extending its license for the field. At the moment, Conoco is not producing any oil and gas in Indonesia following field depletion and is considering options.

Jakarta has also asked Exxon to consider building a refinery in Indonesia or relocating a facility from Singapore as Indonesian fuel demand grows.

According to Bloomberg, Jakarta’s approach to the majors aims to secure early agreements on their operation licenses, to show prospective foreign investors that Indonesia is investor-friendly. The need to reassure investors comes from a long row with miner Freeport-McMoRan: Jakarta wants Freeport and other miners to process copper and other metals locally, and miners have not been too willing to start investing in processing facilities. To force them, the government has threatened to revoke their licenses.

Yet Jakarta needs foreign investments in oil and gas, as well as in mining. Earlier this year, media reported that the country was ambitiously planning to bring in $200 billion in new oil investments as local production declines and demand grows. As part of the plan, Bloomberg reports, Jakarta will allow foreign energy companies to bid for 14 oil and gas blocks, all untapped, sweetening the deal with incentives such as tax-free imports of equipment and technology.

Over the next seven years, Jakarta plans to increase local oil refining capacity to half a million barrels daily, but even so, it may need to import up to 50 percent of the fuels it needs. To date, Indonesia produces around 800,000 bpd of crude and imports another 500,000 bpd, plus 800,000 bpd of refined products.

By Irina Slav for Oilprice.com

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