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First Indonesia Petroleum Bidding Round 2008

Indonesia’s Directorate General of Oil and Gas (MIGAS) launched the First Indonesia Petroleum Bidding Round 2008 on 29 May 2008.  Under this round, 25 blocks are offered under the Direct Proposal Tender with the access to the bid documents open from 17 June 2008 till 29 Jul 2008.  The bid deadline is 31 July 2008.  Winning bids are expected to be announced on 23 September 2008.

Map:  Showing blocks on offer under the First Indonesia Petroleum Bidding Round 2008 (red shading).   Source: PetroView

The Direct Proposal Tender will take place under slightly different conditions compared to a Regular Block Tender, where blocks from open acreage are prepared and designated by MIGAS as available blocks.  In a Direct Proposal Tender, blocks on offer would have been previously working areas held by a company or a consortium of companies under a Joint Study Area (JSA) framework agreement.  These blocks are put forth by the respective companies for bidding so as to sign a Production Sharing Contract (PSC) for the various areas.  It is mandatory for the company proposing the block to purchase the bid documents and data package before submitting the bid proposal.  The period of offer to all bidders is only 45 days, and the company which conducted the joint study and initiated the direct proposal has a first right of refusal to match the winning bid.

The blocks offered in this round are diverse in terms of their locations and historical exploration activity.  The blocks offered include onshore, offshore and deepwater frontier areas.  Most of the areas have had some level of historical activity but some blocks have never been drilled before.

A considerable level of interest can be expected on the blocks offered in the frontier areas of Eastern Indonesia.  The recently awarded Kasuri block won by Genting Oil attracted aggressive competition from the Tangguh consortium led by BP and new entrants such as Asia Pacific Exploration Consolidated (APEC).  The winning bid consists of a USD19 million signature bonus and a reported USD150 million work program that includes five wells.  It should be noted that other blocks awarded with Kasuri in May 2008 attracted signature bonuses of between USD1 million to USD1.5 million.  The firm three year work programme for these other blocks calls for an average of one well to be drilled in each PSC.  Therefore, bidding for blocks south of the Tangguh LNG development will be keenly observed, namely Papua West 1, 2 and 3.  The North Masela block is also likely to attract much interest following Inpex’s successful appraisal of Abadi field which contains about 10tcf of gas.

For most areas offered, the bidding round heralds the return of exploration activity after a hiatus of at least 10 years.  Many are located in mature areas and basins in East Java and on the Sumatra Island and contain wells which tested hydrocarbon indications.  There are also offered blocks covering or overlapping recently relinquished areas such as the East Seruway, South CPP, Lirik-II, SE Tungkal, Madura and Bawean Blocks.

The Indonesian regulatory authorities are stepping up licence awards and bidding activities as part of a wider effort to stem the country’s decline in oil and gas production.  The Government hopes to accelerate exploration activity in addition to implementing secondary and tertiary recovery techniques to mature fields in the near future to meet energy needs in the country.  While the industry awaits the outcome of this current bidding round, authorities have indicated that another bidding round would be announced by the end of 2008.  This represents exciting new opportunities both for new entrants and for companies with existing operations in Indonesia.

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