INDONESIA SAYS IT WILL EXTEND OIL CONTRACTS
Indonesia told the oil industry on
Tuesday it will extend contracts on producing blocks and
improve the investment climate, but wants to see increased
expenditure on exploration in return.
    President Suharto, in an opening speech to the Indonesian
Petroleum Association, said Indonesia was ready to extend
contracts held by foreign oil companies on producing areas.
    "In order to boost investment in the petroleum industry, the
government of Indonesia has basically approved of extending
production sharing contracts under the present laws," Suharto
said.
    "Apart from that, the government will keep improving the
investment climate in order to accelerate the development of
the petroleum industry," he said.
    Indonesian Energy Minister Subroto told the Association he
was aware that the oil industry needed to be assured that
contracts on blocks expiring within the next 10 years would be
renewed before they would invest in further exploration.
    "As we all have heard this morning, the President is fully
aware of this situation," Subroto said.
    "The government has already made the political decision to
entertain this time problem by inviting the existing producers
to continue their activities in Indonesia, albeit on a
selective basis."
    Indonesia, one of the 13 members of OPEC, must find new oil
reserves if it is to remain an exporter in the next decade, oil
industry sources say.
    Subroto said the government was also working to ease other
problems, including granting easier terms for remote areas or
deep water conditions.
    But Subroto said relations with oil companies were two-way
and that they should step up expenditure on oil exploration now
that the oil price had recovered.
    President Suharto said he wanted to see greater transfer of
technology to Indonesian companies, and more help from the oil
industry for the regions in which companies operated.
    Abdul Rachman Ramly, the President of state oil company
Pertamina, has said that budgeted exploration and production
expenditure for all oil companies in Indonesia was forecast to
fall to 3.1 billion dlrs in calendar 1987 from 3.4 billion in
1986.
    Pertamina has 69 production-sharing or joint operation
contracts with foreign oil companies.
    Subroto said speeding up necessary approvals for field
operations was a government priority. There had been
misunderstandings between the government and the oil industry
in certain areas, such as when a field is designated
commercial, and a thorough evaluation was being made.
    He said the government wanted to finalise contract
extensions as soon as practical, and urged the industry in the
meantime to maintain its exploration drive.
    Subroto said Indonesia needed the companies to maintain
exploration efforts, even if their contract was due to expire
within 10 years. "This need in itself is some sort of guarantee
that we will soon have to come up with an extension agreement."
    Eleven major contract areas are due to come up for renewal
between 1991 and 2001, industry sources said.
    Extension of the contracts on the blocks has involved
detailed negotiations but so far no extension has been granted.
    Subroto told reporters afterwards that contract extensions
would be selective, based on how much capital would be
invested.
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