Reva Sasistiya – Investors have largely ignored the Energy Ministry's tenders for 17 oil and gas blocks offered in June because of the government's plans to amend cost-recovery regulations, a senior ministry official said on Wednesday.

Evita Legowo, the ministry's director general of oil and gas, said many investors have complained about uncertainties over the government's planned new implementing regulations on cost recovery, leading them to forego further investments in the energy sector until the issue was clarified.

"They feel uncertain about the oil and gas business in Indonesia because the cost-recovery regulations have not been finished," she said.

Cost recovery is the process whereby contractors are reimbursed for expenses incurred in the development and operation of energy assets. It is central to the government's system of production-sharing contracts.

Under political pressure from lawmakers, the government is revisiting the cost-recovery scheme and is planning to issue new regulations to make it more difficult for companies to claim back expenses.

Implementing regulations establishing new cost-recovery limits are expected to be issued by the Energy Ministry next year, although a date has not been set.

Only one of the 17 recently offered production blocks, the offshore Sula I block in Central Sulawesi, had attracted any interest, with local firm PT Brilliance Energy the sole bidder, Evita said.

In addition, investors expressed interest in only two of the seven exploration working areas offered through the so-called direct-appointment mechanism.

The onshore Blora block in Central Java was awarded to local explorer PT Sele Raya, and the offshore North Makassar Strait block was awarded to a consortium comprised of PT Baruna Nusantara Energy and Canada's Niko Resources.

The government also awarded a production-sharing contract for the already explored Langgak block in Riau province to the consortium of PT Sarana Pembangunan Riau and Kingswood Capital.