Indonesia has unveiled the six blocks on offer in the first of its 2021 licensing rounds, which come with new fiscal terms and conditions intended to attract fresh exploration investment.

The first stages see six working areas consisting of four contract areas being offered through a direct bid mechanism and two through a regular auction mechanism, said director general of oil and gas at the Ministry of Energy & Mineral Resources, Tutuka Ariadji.

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The four blocks offered via the direct tender model are South CPP onshore West Riau, Sumbagsel onshore West Sumatra, Rangkas onshore Banten and West Java, and Liman onshore and offshore East Java.

The two tracts that will be auctioned are Merangin III onshore South Sumatra, and Jambi and North Kangean offshore East Java.

The six blocks are estimated to have total recoverable reserves of 917.93 million barrels of oil and 598.09 billion cubic feet gas.

The South CPP, Rangkas and Liman blocks will be offered with a cost recovery scheme, where exploration and production costs are reimbursed by the government, reported Reuters.

The other blocks will be given the flexibility to choose between cost recovery or a gross split, which would allow operators to bear the cost of exploration and production in exchange for retaining a larger share of any oil and gas they produce.

Other new terms include a signature bonus but with no set minimum — so companies can bid on this — and the application of international crude prices on 100% domestic market obligation (DMO) prices during the contract term.

There will also be amendments to the existing relinquishment requirements for exploration acreage, Upstream understands from people familiar with the process.

"Participants can choose the PSC cost recovery or gross split scheme for regular auctions. However, for direct bidding, the PSC scheme is given based on the submission of companies that have conducted joint studies," said Tutuka.

More acreage to be offered

He added that Indonesia would offer more acreage in the coming months. Some more working areas have already been identified but still need fine-tuning.

“Another revision to fiscal terms from a Southeast Asia country comes as no surprise as they look to revive the investments and production with these fiscal regimes and incentives on some planned developments and producing blocks,” Prateek Pandey, Rystad Energy’s vice president upstream research Southeast Asia told Upstream.

He noted the halving of FTP (first tranche petroleum) from 20% to 10% and 100% cost recovery are likely to have a significant impact on interest from contractors and economics of potential discoveries from these blocks.

Improved profit-sharing split

“Indonesia has also improved the profit-sharing split for these blocks based on the geological, infrastructure and resources risk with a slightly higher contractor’s share on the gas developments in all the risk categories compared to oil developments,” added Pandey.

On Thursday at the industry event ahead of the Indonesian Petroleum Convention in early September, Genting and local contractor Puk Puk signed a memorandum of understanding to sell gas produced from the Kasuri block to a planned ammonia plant in Bintuni.

Also signed was a technical co-operation agreement between Italian major Eni and Indonesia’s upstream regulator SKK Migas, while incentives were announced with the aim of boosting investment at Pertamina’s Mahakam development.

The Indonesian authorities also signed the Plan of Development for the Tanjung Enim coalbed methane development under the gross split PSC model.