Bambang Dwi Djanuarto, the spokesman of the Papua and Muluku special working unit of SKK Migas, the oil and gas upstream business regulator said, when contacted from here on Saturday, that the drilling of the two wells was based upon earlier agreements.
"The drilling of the exploration wells is Murphys commitment to the government, made when it won the bid for the Semai II Block," he said.
He added that Murphy had earlier drilled an exploration well at Lengkuas I at a cost of US$21to 25 million, but the well was found to have no oil and Murphy absorbed the loss.
He said the Semai II Block well has reached 6,500 meters under the sea and the cost of drilling remains very high.
Bambang added that as a contractor, Murphy had to assume all risks and also all financial losses when it failed to discover oil or gas reserves.
"Murphy has taken the possible risks and large financial losses by conducting offshore and deep sea drilling," he said.
Several investors, including Hess and Niko Resources, have reported losing up to one billion US dollars while drilling for oil reserves.
Bambang noted that finding additional reserves would benefit contractors, as well as the country, as they would expand oil production throughout the country.
"Unless new reserves are found, Indonesias oil production is predicted to end within the next ten years. Indonesia is not an oil-rich country," he said.
In view of that, he added that Indonesia expects investors would continue to take risks and financial losses to explore wells throughout the country.
He said the two exploration wells now being drilled are Serai 1 and Bawang Putih 1 using the COSL BOSS rig.
The drilling is expected to be conducted in 90 meter deep waters, drilling down 2,500 meters below the sea.
"The investment for the second and third drilling is smaller, as the well is shallower than the first one," Bambang said.
(Reporting by Kelik Dewanto/K007/H-YH/INE/KR-BSR/F001)