Indonesia Upstream Oil, Gas Terms to Stay - Finance Minister

JAKARTA May 15, 2007 (Dow Jones Newswires)

Indonesia is likely to stick to prevailing fiscal conditions in awarding contracts for oil and gas exploration and production contracts, despite the domestic sector's calls for better terms, the Minister of Finance said Tuesday.

"As much as we want to, if you're asking for (tailored) PSC terms, it's not realistic," said Sri Mulyani Indrawati said of production-sharing contacts.

She was responding to questions at the Indonesian Petroleum Association's annual convention, also attended by Minister of Mines and Energy Purnomo Yusgiantoro.

State-owned Pertamina (PTM.YY) has been seeking partners for 11 exploration blocks and nine producing blocks in Java, Sumatra and Kalimantan, details of which may be finalized this month at the earliest.

At the IPA event, Roberto Lorato, a participant from Italy's Eni SpA (E) asked if terms under PSCs signed many years ago remain "appropriate."

A local company also called for a more attractive share of returns for coal-bed methane projects - involving technology that's new to the country.

The remarks highlight a changing dynamic in the country's upstream: despite historically high energy prices, crude oil production growth has flatlined.

Natural gas producers are also pushing for a faster rate of reserves replacement, while other companies are looking into developing alternative energy sources.

Indrawati, however, said investors must continue to share risks with the government, despite the country's hope to attract more foreign dollars in the energy sector.

"Whether contracts signed in the past are acceptable today, I assure you there's a political debate going on," she said.

Indonesia, East Asia's only member of the Organization of Petroleum Exporting Countries but a net oil importer in recent years, is the world's largest supplier of liquefied natural gas.

The three-day convention, which ends Wednesday, also includes speakers from France's Total S. A. (TOT) and Indonesian upstream regulator BPMigas.

Copyright (c) 2007 Dow Jones & Company, Inc.

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