Anambas Block in Riau Island - Photo: Special.

JAKARTA (TheInsiderStories) – Ministry of Energy and Mineral Resources (MEMR) and Kuwait-based energy firm Kufpec Regional Ventures (Indonesia) Ltd., officially signed the gross split sharing contract for Anambas block in Riau, said the ministry in an official statement on Monday (06/10). The block is part of 2019 phase I oil and gas auction.

“Indonesian government is serious about accepting investments, investment is very important even for only one block,” deputy minister of energy Arcandra Tahar said in his speech.

In this agreement, the Kufpec Consortium provides a definite commitment for the first three years of exploration and includes license purchase and reprocessing of 3D data. The planned exploration of one potential well was agreed with a total investment of US$35.2 million and a signature bonus of $2.5 million.

The utilization of natural resources potential located in the ocean of Riau Islands has been auctioned by the government through the regular auction in February-April period and the winner has been announced on May 7. The gross split contract lasts 30 years.

So far, there are 42 oil and gas blocks using gross split schemes with 16 blocks of the auction results, termination of 21 blocks and amendments of five blocks. This is in accordance with Government Regulation Number 53 Year 2017, which regulated the tax treatment of upstream oil and gas business activities with gross split scheme.

Contractors will get indirect tax incentives. The incentives among others are exempt from collecting import duties, taxes in the context of imports, value-added tax, and the sales tax on luxury goods for imported materials, goods and equipment in the context of oil and gas operations.

Also received a reduction in land and building tax 100 percent until the commencement of commercial production. If the contractor’ income after the reduction in operating costs still has a loss, the value can be compensated with income starting from the next tax year for up to 10 years.

Previously, EMR ministry announced 18 local and foreign companies accessing the bidding documents for oil and gas working area in the first phase of 2019. In the auction of conventional oil and gas working areas in phase I, there are five blocks offered, consisting of two production blocks and three exploration blocks.

Two production blocks, namely, the West Kampar Block located on the mainland of Riau and North Sumatra and the Long Strait Block in mainland Riau. Last, West Kampar block was produced on March 27, 2017, at 112 barrels of oil per day.

The government sets a minimum signature bonus of $5 million and a definite commitment of at least $64.43 million for the G&G Study, 2D Seismic 500 square kilometers, 3D Seismic, and drilling of six exploration wells.

Meanwhile, the Long Strait Block is on the mainland of Riau. This block last produced on Feb. 21, 2018, amounting to 1 barrel of oil per day. The government sets a minimum signature bonus of $5 million with a minimum commitment of at least $62.99 million for G&G studies, 2D 500 km2 seismic, 3D Seismic 200 km2 and drilling of five exploration wells.

Then there are three explorations blocks auctioned, one of which is the Anambas Block off the coast of Riau Islands, with a minimum $2 million Signature Bonus and a minimum of definite commitments: G&G Study and drilling of one exploration well.

Next is the West Ganal Block off the coast of East Kalimantan, with a minimum $15 million Signature Bonus and a minimum of definite commitments such as G&G Study, drilling three exploratory wells, 400 km2 3D Seismic and 2D Seismic 500 km2.

Finally, the West Kaimana Block on the mainland and offshore of West Papua with a minimum $2 million Signature Bonus and minimal definite commitment: G&G Study, drilling 1 exploration well and 2D Seismic 200 KM.

It is reported that the bidding schedule for conventional oil and gas working areas for the first phase of 2019 is access to bid document from February 25 to April 24. Entry of participation documents can be done no later than April 25.

The auction offers for Oil and Gas blocks is shown to Business Entities and Permanent Establishments of the upstream oil and gas industry that have financial and technical capabilities. They must be able to meet the minimum five-year definite work commitment or definite exploration commitment, and have a good performance and track record.

Written by Willy Matrona, Email: theinsiderstories@gmail.com