Indonesia Vows to Work with Private Cos to Restore Oil Glory

HOUSTON, (Dow Jones Newswires), May 08, 2008

Vowing to reverse Indonesia's gradual decline as an oil exporter, Indonesian petroleum officials Wednesday promised to work with private oil giants to encourage new investment in East Asia's lone member of the Organization of Petroleum Exporting Countries.

"If you have any kind of suggestion, come to my office," Luluk Sumiarso, director general of oil and gas for the Indonesian energy ministry, told a petroleum industry gathering in Houston Wednesday. "We are listening for input from investors for improving our contract terms."

In October 2007, Indonesia offered up 26 oil and gas leases. Luluk Wednesday said Indonesia planned to solicit bids for an additional 18 blocks at an Indonesian petroleum industry gathering later this month. Luluk also promised to provide better fiscal terms to prod more investment. He spoke at a breakfast attended by about 180 people at the Offshore Technology Conference.

Capitalizing on soaring oil prices, Venezuela, Russia and other leading oil-producing countries have pressured the private oil giants to revise contract terms to benefit resource-holding nations. Luluk's comments Wednesday signaled a more benign government reception from Indonesia as it struggles to restore its oil production.

Indonesia in April averaged about 860,000 barrels a day, down from a peak of almost 1.7 million barrels a day in the early 1990s. Indonesian President Susilo Bambang Yudhoyono said Tuesday that Indonesia was considering dropping its OPEC membership.

Luluk said that with the right fiscal terms, Indonesia could consistently pump more than 1 million barrels a day, in part by restoring "idle fields" that aren't currently producing.

"We can easily give a better split, especially in the frontier area," Luluk said.

Luluk was flanked by executives from Indonesian national oil company PT Pertamina and U.S. giants Chevron Corp. (CVX) and Exxon Mobil Corp. (XOM). The two U.S. companies both emphasized their long-term commitment to Indonesia.

"They're doing many positive things, from offering more leases to offering better terms," Stephen Greenlee, ExxonMobil vice president for Asia Pacific, told Dow Jones Newswires following the breakfast. Greenlee praised the Indonesian government for allowing the U.S. oil giant to employ a foreign drilling rig with minimum red tape.

ExxonMobil's participation in the Natuna-D offshore gas block is "being discussed," Greenlee said. In February, the Indonesian government transferred the project to Pertamina.

Indonesia's broader energy challenge is that "much of the production was found a long time ago, and it's quite mature," said Greenlee. The key question is whether new exploration points to "the potential to grow," he added.

Copyright (c) 2008 Dow Jones & Company, Inc.

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