Opening up

South East Asia’s largest economy has awarded four oil and gas blocks to local and foreign companies, including BP Exploration Indonesia, a unit of oil major BP, a government official has confirmed.

The Indonesian government has selected four winners the new blocks it recently tendered via direct offer, the ministry said in a statement released in November.

The North Arafua Block in Papua was awarded to BP Exploration Indonesia, a unit of BP, Director General of Oil and Gas at the Ministry of Energy and Mineral Resources Evita Legowo told reporters. The government awarded the North Sokang Block in Riau to Ephindo Oil and Gas Holding, with an investment total of US$10.2 million. The Awe Consortium, which consists of Baruna Recovery Energy and Sillo Maritime Perdana, was awarded the Titan block in Java, although no details were provided about which provinces would be covered by the project. Mitra Energy is set to explore the Bone Block in South Sulawesi, with a total investment of US$6.1 million.

Legowo said that the successful bidders have pledges to invest a total of US$28 million during the first three years of exploration, including US$4.2 million signature bonus for the government.

Two other blocks, Oniin and East Baronang failed to attract investors due to limited data available on these blocks.

Medco Energi International, Camar Resources and Canadian Husky will totally invest US$4.58 billion in the next 20 years to develop their blocks and the contract extension will boost Indonesia's production by 174 million barrels of oil and 1.78 trillion cubic feet of gas over that period, Legowo said.

The Bawean block, whose contract expires in 2012 is operated by Medeco subsidiary Camar Resources, which plans to spend US$1.239 billion over the extension, according to Legowo. The Bawean block currently produces about 800-1000 b/d.

The Madura block, whose contract expires in 2012, is operated by Husky Energy. The company is committed to invest US$642 million over the 20-year extension. The block is still currently being developed but is expected to see initial production by 2013-2014 at 100000 mcf/day and 600 b/d of condensate.

South Sumatra block and Block A in Nanggroe Aceh Darussalam, operated by Medco E&P Indonesia, have contracts set to expire in 2013 and 2011, respectively. The company has committed to invest US$1.411 billion and US$1.291 billion, respectively, the ministry said. Medco expects Block A to be on stream by Q2 2013 at 60,000 Mcf/day and expand to 110000 mcf/day within the year.

In recent years Indonesia has become a net importer of crude oil as production fell after a failure to tap new fields fast enough. The country has been offering new exportation rights and financial incentives for oil field in a bid to stem a steady decline in production. It has set a target to produce 965,000 b/d of crude and condensate this year as well as 7.56 bcf/d of gas.

Indonesia has awarded 42 blocks across the country for exploration this year (2010) in an attempt to help the country meet its increased oil production targets over the coming years. A number of recent incidents, including a major leak in a pipeline operated by Transportasi Gas Indonesia at the end of September has made reaching the ambitious target seem somewhat more unattainable. The September leak caused disruptions to approximately 20 percent of the nation's total production capacity.

The country suffered another blow when Chevron Pacific Indonesia's (CPI) Durt oil field in Riau stopped production in October after one of its pipelines burst. CPI is accountable for some 40 percent of the nation's total oil output.

Indonesia has been trying to attract foreign investment to develop new oil and gas fields by offering incentives, including favourable tax treatment and production sharing.

Oil and gas company Salamander Energy are set to add an optimistic light on Indonesia's state of affairs. The company have said that it is maintaining its 2010 production guidance at over 20,000 boepd, compared with the 2009 level of 13,600 boepd.

Production has also been forecast to rise to 30,000 boepd by 2013. The group said it was currently focused on delivering the seven wells in Indonesia and Thailand that are due to be completed by the end of January.

The group has a planned programme of 11 exploration wells and four appraisal wells in 2011, with exploration drilling in new licenses including: SE Sangatta PSC in the offshore Northern Kutei basin, Indonesia; Bangkanai PSC, onshore Barito basin, Indonesia; and the Cat Ba prospect in Block 101-100/04 in the Haiphong sub-basin, offshore northern Vietnam.

In August 2010 the group reduced net entitlement proven and probable reserves by 1.8 million boe (7.5 million boae on a net working interest bases) after revising its reserve estimate for the Kambuna field, offshore North Sumatra. The decision came after the group observed faster than expected pressure decline in the Kambuna-3 well.  Near term production and cash flow will not be impacted, Salamander Energy said.

James Menzies, CEO of Salamander Energy said: "We have maintained production guidance for the full year at over 20,000 boepd and our production forecast of 30,000 boepd by 2013. Looking to the future, the group's growing production base will support an active, diversified, multi-year exploration and appraisal drilling programme with material upside potential. The company will also look to maintain its track record of value creation via acquisitive growth in the region."

A strong balance sheet was maintained with funds of US$154 million available and net debt of US$176 million at September 30. Continued expansion of the portfolio saw acquisition of the outstanding 40 percent of B8/38 in the Gulf of Thailand from Soco International and acquisition of Enulsa Bankanai Energy, providing a 69 percent- operated interest in the Kerendan gas development in East Kalimantan.

The oil and gas industry, both in Indonesia and globally, has experienced dramatic highs and lows in recent years. The industry has been experiencing a significant resurgence in investment, coinciding with the rise in crude oil prices. The price peaked at US$145 per barrel in mid 2008, this was then tempered by the global financial crisis in the latter half of the year. Market confidence returned slightly in 2009 with the year ending at approximately US$75 per barrel. Renewed investor confidence in 2010 has lead to increased exploration spending and it is hoped to continue throughout 2011.

Indonesia has been an active player in the oil and gas sector for more than 125 years after its first oil discovery in North Sumatra in 1885, and continues to pursue a key role in the international oil and gas industry.

1885

First discovery of oil in North Sumatra

1912

Standard Oil exploration in South Sumatra

1921

The biggest discovery before WWII (Talang Akar field)

1944

Caltex Minas- largest oil field in Southeast Asia- was discovered

1961

Government signed first PSC in Aceh

1962

Indonesia joined OPEC

1976

PSC 45% Tax Rate

1978

First LNG plant entered production & PSC share changes from nett to gross production

1984

PSC 35% Tax Rate

1994

PSC 30% Tax Rate

2001

New Oil and Gas Law No.22 promulgated (revoking Law No.44 and Law No.8)

2002

Formation of BP Migas and BPH Migas

2003

Pertamina becomes PT Pertamina (Persero) with profit making intent

2008

OPEC Membership suspended

2009

Latest report from BMI predicts the country will account for 4.41% of Asia Pacific regional oil demand by 2013, while providing 10.97% of supply.

2010

Indonesia awards four new blocks for exploration

(Source: PricewaterhouseCoopers Indonesia)

Indonesia major oil producers as of December 2009

CHEVRON 47%

PERTAMINA 16%

TOTAL 9%

CONOCOPHILLIPS 8%

PETROCHINA 7%

CNOOC 5%

MEDCO 4%

BP* 2%

KODECO 2%

*The BP assets representing this production have been subsequently sold to Pertamina.

(Source: Petrominer Monthly Magazine)

Asia Pacific Total Oil Reserves at the end of 2009

Australia- 4.2 thousand million barrels

Brunei- 1.1

China- 14.8

India- 5.8

Indonesia- 4.4

Malaysia- 5.5

Thailand- 0.5

Vietnam- 4.5

Other Asia Pacific- 1.3

Total Asia Pacific- 42.2

Total World- 1333.1

(Source: BP Statistical Review of World Energy June 2010)