“We’ll improve investment climate”, says Energy Minister during Oil and Gas Investment Day

Thursday, 17 June 2021 - Dibaca 927 kali

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 205.Pers/04/SJI/2021

Date: 17 June 2021

"We'll improve investment climate", says Energy Minister during Oil and Gas Investment Day

The upstream oil and gas industry still holds a significant role as the key driving force in the Indonesian economy. The government has continuously made efforts to create a favorable investment climate in a bid to achieve the production target of 1 million barrels of oil per day (BOPD) and 12 billion standard cubic feet per day (BSCFD) of gas by 2030.

Minister of Energy and Mineral Resources (EMR) Arifin Tasrif, who witnessed various strategic signing in the upstream oil and gas subsector firsthand, said that emerging global and local trends such as the shale oil revolution in the US, energy transition, and low oil prices have created a very competitive market for investments in the upstream oil and gas business.

According to analysis by oil and gas consulting companies such as Wood Mackenzie, IHS or Rystad, Indonesia is still considered as an attractive place for investment. However, the attractiveness is driven more by the prospect of oil and gas resources. In terms of the fiscal system and the oil and gas risk, however, there is much room for improvement.

"We must build awareness that we are in competition with other oil producing countries around the world to attract investment and, therefore, we must improve our investment climate," said Arifin during the Oil and Gas Investment Day in Jakarta on Thursday (17/6).

Arifin also said that the Offer of Conventional Oil and Gas Blocks Round I of 2021 would be announced today by Director General of Oil and Gas. "To improve investment climate and attract investors, the Indonesian government will launch new terms and conditions that are expected to be more competitive, and make this year's Bidding Round a success," explained Arifin.

To reach this goal, Arifin asked all stakeholders to contribute to the development of Indonesia's oil and gas subsector. "We must build strategic partnership between the government, the business world, and the community," said Arifin.

Head of SKK Migas Dwi Soetjipto explained that to improve investment attractiveness, it is necessary to accelerate the policy formulation process involving the Ministry of EMR, Ministry of Finance, and SKK Migas. "It is necessary to accelerate the launching of more effective fiscal policies that can encourage investors to increase production and exploration activities in Indonesia," Dwi said.

In a similar vein, President of Indonesian Petroleum Association (IPA) Gary Selbie said that the event, which was jointly organized by the Ministry of EMR and IPA, offered a good opportunity for investors to hear more about the latest progress on upstream oil and gas investment in Indonesia. IPA believes that the prospects for Indonesia's upstream oil and gas industry remain very positive with several new basins and exploration targets in many areas in Indonesia.

"Investors also have the opportunity to witness important signing between the government and various oil and gas investors. We are also honored to hear from Mr. Tutuka, Director General of Oil and Gas, about the tender process for several new oil and gas blocks that will soon go out," Gary added.

I. Signing of Strategic Upstream Oil and Gas Agreements

1. Presentation of the Approval for Revised Plan of Development (POD) of Pertamina Hulu Mahakam (PHM) with fiscal incentive set out under Government Regulation (GR) Number 27 of 2017, the first production field to be given fiscal incentive in accordance with GR 27 of 2017

The government has approved the fiscal incentive proposal submitted by Mahakam Block operator, PT Pertamina Hulu Mahakam (PHM). It is the first incentive package given to an Indonesian block in the production phase. The approval for this incentive package will enable PHM to execute pending development projects, maximize resources recovery, and assure continuity of business and operation of Mahakam Block until contract expires in 2037.

Mahakam Incentive Package has been granted in accordance with the provisions set out in GR 27/2017, and consist of the following instruments:

- Relaxation of first tranche petroleum

- Investment credit

- Acceleration of capital depreciation

- Non-collectible VAT facility and reduction of subsurface Land and Building Tax

- Exemption from State Asset rent

2. Amendment to the Plan of Development (POD) of Coal Bed Methane (CBM) Production contract in Tanjung Enim Block

This is the first time the Gross Split scheme is adopted by a CBM Production contract. The amendment to the Production Sharing Contract (PSC), from Cost Recovery scheme to Gross Split scheme, was approved on 4 May 2021 by Minister of EMR.

Tanjung Enim PSC was first signed in 2009. The contractors of Tanjung Enim CBM PSC are operator Dart Energy (Tanjung Enim) Pte. Ltd. ("Dart Energy") and its partners PT Bukit Asam Metana Enim (BAME) and PT PHE Metra Enim.

Until 2018, Tanjung Enim CBM PSC had executed several exploration activities, for example drilling of 13 exploration wells (consisting of core and production wells). Based on exploration data and subsurface evaluation, Areas A and B have CBM reserves of 127.93 BSCF from Muara Enim Formation.

3. Gas Sales Agreement

The signing marks a milestone in Indonesia's upstream oil and gas business, and is aimed at supporting the development of fertilizer industry and the oil and gas lifting.

a. Signing of Memorandum of Understanding (MoU) between Genting Oil Kasuri Pte Ltd (GOKPL) and PT Pupuk Indonesia to develop Ammonia-Urea and Methanol Projects in Bintuni

The MoU signing denotes the firm support of the Government of Indonesia on the development of natural gas in the eastern Indonesia, especially in West Papua Province. This agreement will secure the utilization of roughly 1.66 Trillion Cubic Feet (TCF) natural gas from Asap, Kido, and Merah fields by the ammonia, urea and the methanol plants built by PT Pupuk Indonesia and its subsidiaries. This project will boost the economic development of West Papua, especially through job creation and larger investment opportunities. The project has been estimated to become onstream by 2025 with a daily supply of 112.6 MMSCFD for the ammonia, urea plant and 109.3 MMSCFD for the methanol plant.

b. MOU signing between PetroChina International Jabung Ltd (PIJL) and:

1. PT Pupuk Sriwidjaja (Pusri) on the development of Pusri-3B Project estimated to become onstream by 2036 with a daily supply of 60 BBTUD; and

2. Pertamina Hulu Rokan (PHR) on gas supply for Steam Flood operation in Rokan Block with a daily supply of 50 BBTUD estimated to become onstream by 2023.

c. MOU signing between Repsol Sakakemang B.V and:

1. PT Pupuk Sriwidjaja estimated to become onstream by 2024 with a daily supply of 38 BBTUD; and

2. PT Pertamina Hulu Rokan (PHR) with a daily supply of 15 BBTUD.

d. MOU signing between Kangean Energy Indonesia (KEI) and PT Petrokimia Gresik (PKG) estimated to become onstream after 2027.

4. Signing of Upstream Oil and Gas Exploration Cooperation between ENI Indonesia and SKK Migas

Oil and gas exploration in Indonesia still offers enormous potential. For this reason, SKK Migas hopes to have a different angle of subsurface understanding through this technology collaboration. In recent years, ENI has had a number of exploration successes with the discovery of significant volumes of hydrocarbons due to the company's innovative approach using cutting-edge technologies.

The purpose of this MOU is to identify and evaluate potential collaboration through the exchange of information, data, and ideas, and to define a dedicated framework for possible implementation in Indonesia.

5. Joint Study Agreement (JSA) on exploration cooperation between Pertamina Hulu Energi (PHE) and Posco International Corporation based on the exploration results of the Firm Commitment of PHE Jambi Merang

The Joint Study Agreement and collaboration between PT Pertamina Hulu Energi and POSCO International Corporation have been based on the shared spirit to look for an opportunity in hydrocarbon exploration potential in open area. Pertamina had previously conducted 2D seismic survey to meet the firm commitment of PHE Jambi Merang. Both parties have proposed a joint study covering an area of 11,515 km2 where a suite of hydrocarbon occurrences had been identified during 1980s to early 1990s through previous exploration activities.

The main objective of the Joint Study is to review the proposed area and assess the feasibility of the petroleum system from the Pre-Tertiary source rocks by integrating the new, reprocessed 2D seismic results with the seismic survey results from the Firm Commitment of Pertamina Jambi Merang. The collaboration between PT Pertamina Hulu Energi and POSCO International Corporation is expected to contribute to Indonesia's increased oil and gas reserves as well as energy sustainability in the future.

II. Announcement of Oil and Gas Blocks Offer Round I of 2021

The government has continuously sought to make the auctions of oil and gas blocks more attractive by improving the terms and conditions, such as increasing the contractor's profit sharing by taking into account the risk factor of the block, open bid of Signature Bonus, 10% FTP, setting of 100% DMO price during the contract period, flexibility of PSC scheme (Cost Recovery or Gross Split PSC), new provision of relinquishment (no obligation to relinquish part of the area in the third year of the contract), easy access to data through the membership mechanism in the Migas Data Repository (MDR), as well as incentives and tax facilities in accordance with the applicable laws and regulations.

There are six oil and gas blocks on offer, consisting of four blocks that are up for Direct Offer and two blocks up for Regular Tender.

A. Four oil and gas blocks that are up for Direct Offer:

No.

Block

Location

Size (Km2)

Minimum of Firm Commitment

1.

South CPP

Riau onshore

5,446.39

- G&G

- 500 Km of 2D seismic

- 50 Km2 of 3D seismic

- 1 exploration well

2.

Sumbagsel

South Sumatera onshore

1,751.04

- G&G

- 1 exploration well

3.

Rangkas

Banten & West Java onshore

3,969.8

- G&G

- 300 Km of 2D seismic

4.

Liman

East Java onshore and offshore

3,135

- G&G

- 400 Km of 2D seismic

B. Two oil and gas blocks that are up for Regular Tender:

No.

Block

Location

Size (Km2)

Minimum of Firm Commitment

1.

Merangin III

South Sumatera and Jambi onshore

1,488.84

- G&G

- 100 Km2 of 3D seismic

- 1 exploration well

2.

North Kangean

East Java offshore

4,679.33

- G&G

- 200 Km2 of3D seismic

- 1 exploration well

The government invites domestic and overseas companies (Business Entities, BU/Permanent Establishment, BUT) in the upstream oil and gas business with financial and technical capabilities, ability to meet the requirements for a minimum of 3-year firm commitment, ability to meet the terms and conditions of the block tender, and good performance and track record, to participate in the first round of Indonesia Oil and Gas Blocks Auction of 2021, with the following schedule:

A. Direct Offer

a. Access to Bid Document: 17 June 2021--28 July 2021

b. Submission of Participation Documents: 28 July 2021--30 July 2021

B. Regular Tender

a. Access to Bid Document: 17 June 2021--12 October 2021

b. Submission of Participation Documents: 12 October 2021--14 October 2021

Interested companies can register and access Bid Document through the e-tender website at https://esdm.go.id/wkmigas according to the above schedule. (IY)

Head of Bureau of Communication, Public Information Services, and Cooperation

Agung Pribadi (08112213555)

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