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SCMP Reporter

A PACKAGE of oil and gas exploration incentives announced by state-run oil company Pertamina has failed to attract the interest of major foreign contractors who say the incentives are unclear and saddled with risk.

  They said they had not been officially informed of the incentive package, which was announced at a press conference by Faisal Abda'oe, president-director of Pertamina, on Monday.

    Press reports quoted Mr Abda'oe as saying the incentives were effective from last Saturday, but several oil company officials said that as far as they were concerned there was no effective date.

  ''The incentives will be able to generate economic development in the eastern region and increase found oil reserves which now stand at 11 million barrels,'' Mr Abda'oe said.

   He said the incentives were intended to delay the country's process of becoming a net oil importer, which was expected to occur in 2000.

   The discovery of new reserves could easily stave off dependence on imports for another decade or so, according to industry analysts.

      But foreign oil officials said the Pertamina announcement reflected more of a concern that contractors were showing a lack of interest in the Indonesian industry than any fear for long-term energy needs.

   ''It reflects the fact that oil companies are going elsewhere,'' one source said.

    More favourable terms in fields opening up in Russia and eastern Europe, for example, had drawn away oil companies that would otherwise had considered investing in Indonesia, sources said.

    Until January 1, the share for foreign firms in production-sharing contracts was 20 per cent in so-called frontier zones in eastern Indonesia. The incentives would raise the foreign share to 35 per cent.

   In offshore fields with a depth of 1,500 metres, the share would rise to 35 per cent from 25 per cent.

   The foreign share of the split has been far worse in the past, falling to 10 per cent at one point. As a result, contracts have tailed off in recent years.

   Pertamina had revealed plans for the incentive package last autumn and sources said Monday's announcement fell far short of expectations.

   They added that the incentive package appeared ''inconsistent'' in defining the areas where the new production sharing split would apply.

    ''Frontier terms apply in some areas that are not in the frontier, and don't apply in some areas that are,'' said one source.

   ''We've been hoping Indonesia would come up with a map of which terms apply to which areas, but so far they haven't done that,'' he said.

     But some sources said the fact that incentives were being offered at all was positive.

   ''At least it shows that they're willing to make improvements,'' one company official said.



Overseas companies snub Pertamina incentives offer