The offer includes 10 conventional blocks and five unconventional oil and gas blocks, and all will be offered under a gross split production sharing contract scheme, Wiratmaja Puja, director general of oil and gas said.

 

Conventional oil and gas blocks using the regular bidding rules are for Tongkol in the East Natuna Basin, East Tanimbar in the Maluku region and Memberamo in the Papua province, while conventional blocks accepting direct offers are Andaman I, Andaman II, South Tuna on Riau island; Merak in Banten and Lampung; Pekawai in East Kalimantan; West Yamdena in Maluku; and Kasuri III in West Papua.

 

There are two shale gas blocks, Jambi and Jambi II, and three CSG blocks in South Sumatra: Raja, Bungamas and West Air Komering. 

 

The new PSC rules offer better cost recovery times and cut import duties on exploration equipment where possible, the government says.

 

Under the old scheme, the state reimbursed contract holders for exploration and production costs but received up to 85% of output earnings, an arrangement that protected contractors' investments but limited their returns. 

 

The new system makes contractors responsible for exploration, development and operational costs but gives them a larger share of the returns.

 

Under the new arrangement, the state will take 57% of output from oil fields, with the remaining 43% going to the contractor; for gas fields, the margins are narrower, at 52% and 48%, respectively.

 

Deputy energy minister Arcandra Tahar said that if the split offered is not acceptable, assuming there was solid analysis, the government was open to negotiating on a further 5%.

 

The release of the new areas is hoped to generate exploration funding of at least $US20-30 billion ($A26-40 billion), a prized East Natuna block, with a potential for 48 trillion cubic feet could generate a $30-40 billion investment over time.

 

Indonesia offered a total of 17 oil and gas blocks last year, but while there were numerous bids, only one block was awarded. 

 

Wood Mackenzie director of Asia Pacific upstream oil and gas research Andrew Harwood is one who believes the new rules will not be sufficient to entice the levels of exploration the government is hoping to see.

 

"In Indonesia at the moment, the returns are difficult, the time to get a return is too long, and the risk of political involvement is quite high," he said.

 

"So it's difficult for Indonesia at the current stage to get the gross split to be attractive against other opportunities oil and gas companies have elsewhere," he said referring to opportunities in the Gulf of Mexico, Africa, Europe and Australia."

 

Indonesia is desperate to turn around its declining production, and despite President Joko Widodo's efforts to improve the ease of doing business for energy investors in Indonesia there are concerns it will lose out to other jurisdictions.

 

Investment in Indonesia's oil and gas sector remained bleak in the first quarter of 2017, with investment falling 4.1% for the first quarter compared with early 2016.

 

Total investment was $2.57 billion. 

 

Indonesia's upstream oil and gas regulator SKK Migas has set a target of attracting a total of $12.87 billion worth of investment in the oil and gas sector in 2017, and the regulator has already warned it may fall short because the oil price being less than $50 per barrel is not providing an incentive to explorers.

 

 Key metrics, such as 2D and 3D seismic surveys and drilling are all in decline. 

 

Indonesia, which was the world's largest exporter of LNG in 2005, decided in 2006 it would focus on its domestic needs, and it is now in fifth position behind Qatar, Malaysia, Australia and Nigeria.

 

In terms of oil, Indonesia, Southeast Asia's biggest economy, re-joined OPEC in 2015 but suspended its membership in November as it feared being swept up in OPEC's production cuts even as the nation tries to turn around its declining oil and gas production and overcome aging infrastructure and a lack of investment in exploration for years.

 

Oil production is now around 800,000 barrels per day, and the nation is trying to increase that to 1MMbopd.

 

It is on track to import around half its fuel needs within seven years, according to BMI Research, because consumption is set to rise by 31% out to 2025.

 

Indonesia is investing in its refining capability with a focus on bringing in raw crude and refining it through new and existing facilities.

Indonesia imports about 500,000bopd of crude and about 800,000bbl of refined petroleum, but the government is planning to grow 2% by 2025 with new investments by Pertamina, Rosneft and Saudi Aramco.