I haven't seen this posted here before, I noticed it a few weeks...

I haven't seen this posted here before, I noticed it a few weeks ago. These changes will have very positive implications for the Indonesian oil and gas market in terms of attracting new investors and ultimately enhancing the value of existing assets. Regards Pihrana

News wires Tuesday, 05 January, 2010, 10:39 GMT

Indonesia plans to scrap curbs on a scheme to reimburse oil and gas companies for exploration spending in order to support flagging investment,
a senior energy ministry official said today.

Indonesia's cost recovery scheme reimburses oil companies for exploration and production costs, although the billions of dollars paid out have come under political scrutiny at times and the country's parliament has intervened to bring in limits.

"Investors say the fall in oil production is the impact of capping cost recovery," Reuters quoted Evita Legowo, director general oil and gas at the
Energy Ministry, as telling reporters.

"I will talk to finance ministry officials to discuss how to abandon the
cost recovery cap."

Indonesia expects spending by contractors of oil and gas exploration in the country to fall to $2.3 billion this year, down about 15% from an estimated
$2.7 billion in 2009, the country's oil watchdog has said previously.

Legowo said the planned cap on cost recovery this year was $12 billion for
upstream oil and gas operations.

Chief Economics Minister Hatta Rajasa was quoted as saying the policy of
capping cost recovery was not appropriate.

"This is not supposed to be capped. We will fix this matter," Rajasa was
quoted as saying by the Jakarta Post daily today.

Crude production, which was about 1.5 million barrels per day in the 1990s, has nearly halved and Indonesia has become a net importer of crude oil in
recent years.

Major global resource companies such as Chevron, ConocoPhillips and Total operate in Indonesia, but the country has struggled to attract fresh
investment and to develop new fields.

Many of the existing fields are ageing and plagued by sagging output.

Amir Hamzah, an official at energy watchdog, BPMigas, said the fall in
exploration spending by oil contractors would hit future production.

"Many investors now are taking a wait-and-see attitude due to the cost recovery issue. This is really bad for Indonesia's oil and gas industry in
future," Hamzah said.

Indonesia produced 949,100 bpd of crude oil and condensate in 2009, missing
a target of 960,000 bpd in the year.

An energy ministry official, who declined to be identified, said previously a target of producting 965,000 bpd of crude and condensate this year would be very difficult to achieve since output from older wells was falling about
10% to 15% per year.

Indonesia has offered new exploration rights and has said it will provide new incentives to oil and gas investors, including more favourable tax treatment and a better production split, in order to encourage exploration.


But industry insiders have said the incentives may not be sufficient, particularly since many of the unexplored fields are in remote locations and
often in deep water, and so expensive to develop. Published:05 January
2010 |Last updated: 05 January 2010