The Indonesian government is set to re-auction 49 terminated Oil and Gas Working Areas (WK Migas) that were returned to the state or terminated during the period from 2020 to the first half of 2023.
Dwi Soetjipto, the Head of SKK Migas (Special Task Force for Upstream Oil and Gas Business Activities), explained that the re-auction of these oil and gas working areas would involve several improvements, including reducing the signature bonus and enhancing the profit-sharing scheme.
“For instance, the previous signature bonus and other terms might have been too burdensome, and it might be reduced. Regarding the profit-sharing, it could be improved to make it more attractive,” he stated on October 12, 2023.
This reassessment is primarily aimed at making the auction more appealing to potential bidders, allowing them to assess the potential of the terminated WK Migas. The government will also scrutinize the financial capabilities of auction participants to prevent future terminations.
“The majority of terminations have occurred because the contract holder did not have sufficient financial capacity. So, during the tender, we will thoroughly evaluate the financial capabilities of participants to avoid further terminations,” Dwi said.
He further explained that terminations result from the exploration process exceeding agreed-upon deadlines or the inability to meet contractual commitments.
“We see that efforts to find solutions to prevent terminations have been exhausted, and both parties agree that there is no other option but termination,” he added.
Terminations are chosen as a means to attract operators who may have the necessary technology, capabilities, and, importantly, adequate financial resources.
Regarding financial capacity, Dwi noted that the primary reason for exploration periods expiring and WK Migas being terminated is financial issues.
“Why did it expire? Because they didn’t have the money, most often, they didn’t have the funds to carry out the work until the end of the contract,” he explained.
