Medco Energi basks in optimism despite crisis<\/p>\n
By Johannes Simbolon<\/p>\n
JAKARTA (JP): The country's biggest private oil and gas
\ncompany, Medco Energi Corporation, is optimistic about 1998 after
\nmaking some impressive achievements last year amid the monetary
\ncrisis.<\/p>\n
The company's subsidiary, PT Exspan Sumatra, surprised the
\ncountry's oil industry when it announced in December that it had
\ndiscovered oil reserves of approximately 350 million barrels in
\nits Kaji and Semoga fields of South Sumatra. The discovery was
\nthe largest oil find in the country in the past 15 years.<\/p>\n
According to independent oil consultant De Golyer &
\nMacNaughton, 32.2 percent, or 114 million barrels, of the reserve
\nis categorized as proven and probable.<\/p>\n
\"Drilling activities are going on. The reserve could be
\nlarger,\" said Medco Energy's finance and administration director,
\nSugiharto, recently.<\/p>\n
Noted oil analyst Fiona Nicol of Dresdner Kleinwort Benson
\nResearch expressed optimism over the company's outlook, noting
\nthat it had doubled its profits to Rp 75.2 billion last year from
\nRp 40.2 billion in 1996.<\/p>\n
Nicol projected Medco would increase its profit four times to
\nRp 299 billion this year, following the company's growing
\nactivities and the continued depreciation of rupiah.<\/p>\n
\"Medco sells crude oil and natural gas in U.S. dollars ...Day
\nrates for drilling rigs (of the company) are also U.S.
\ndenominated. (Its) methanol is sold in U.S. dollars as well,\" she
\nsaid.<\/p>\n
\"Thus, for all practical purposes, Medco is a U.S. dollar
\ncompany,\" she added.<\/p>\n
Medco Energi, which is 63 percent owned by its founder Arifin
\nPanigoro, has five subsidiaries: oil and gas producers PT Exspan
\nSumatra and PT Exspan Kalimantan, onshore drilling contractor PT
\nMeta Epsi Antareja, offshore drilling contractor PT Apexindo
\nPratama Duta, and methanol producer PT Medco Methanol Bunyu.<\/p>\n
Medco Energi is part of Arifin's widely diversified Medco
\ngroup, which is also active in banking, hotels, agribusiness,
\nfood and cement.<\/p>\n
Expansion<\/p>\n
A graduate of the prestigious Institute Technology of Bandung,
\nArifin started Medco Energi with Meta Epsi in the 1980s with only
\none oil rig. It was the first Indonesian drilling contractor in a
\nsector dominated by foreign companies.<\/p>\n
Today, Meta Epsi is the country's largest onshore drilling
\ncompany with 11 rigs, two of which are being used by Medco while
\nthe other nine are on lease.<\/p>\n
Arifin subsequently formed Apexindo in the 1990s to expand to
\noffshore drilling. Today, Apexindo has three offshore rigs,
\nmaking it the single biggest operator in Indonesia.<\/p>\n
After having gaining experience in drilling activities, Arifin
\nentered the field of oil and gas exploration and production in
\n1992 with the purchase all of the United States company Tesoro's
\ninterests in East Kalimantan. He formed Exspan Kalimantan to
\noperate two production sharing contract (PSC) areas and one
\ntechnical sharing contract (TSC) area.<\/p>\n
Sugiharto said after taking some efficiency measures,
\nincluding reducing the number of the highly paid foreign workers
\nfrom nine to two, Exspan was able to raise the ex-Tesoro contract
\nareas's oil output to 6,000 barrels per day (bpd), compared with
\nTesoro's oil output of 4,700 bpd.<\/p>\n
Tesoro also produced gas, which was used for oil lifting.
\nExspan increased gas output and sold it on the market.<\/p>\n
Sugiharto said Exspan currently supplied 24 million cubic feet
\n(MMCF) of gas per day from its gas field on Tarakan Island to the
\nstate oil and gas company Pertamina's methanol plant on the
\nisland of Bunyu, East Kalimantan. Medco Methanol has negotiated
\nto operate the methanol plant for 20 years on the profit-sharing
\nbasis with Pertamina.<\/p>\n
Since mid-December of last year, Exspan also has been
\nsupplying 10 MMCF of gas per day from the Sanga-Sanga Semboja gas
\nfield, also in East Kalimantan, to the coal-fired power plant
\nowned by the state electricity company PLN in Tanjung Batu.<\/p>\n
In 1994, Arifin sold 22 percent of the company's shares to the
\npublic to raise $36.7 million in proceeds and until now it is the
\nonly oil and gas company quoted on the bourse.<\/p>\n
Medco, listed on the Jakarta Stock Exchange, used some of the
\nproceeds to buy PT Stanvac Indonesia -- a joint venture of Exxon
\nand Mobil Oil -- with operations in the central and southern
\nareas of Sumatra. The ex-Stanvac areas were put under Exspan
\nSumatra.<\/p>\n
The ex-Stanvac area produced 11,000 million barrels of oil
\nfrom two production contract areas of Kampar in Riau and Rimau in
\nSouth Sumatra and had an exploration contract area called South
\nSumatra Extension.<\/p>\n
\"Market sentiments toward Medco was very negative then. People
\nasked 'Can a small company like Medco do better than an
\ninternational company like Mobil?'\" Sugiharto recalled.<\/p>\n
Medco proved its luck by discovering the oil bonanza at the
\nKaji and Semoga fields in the Rimau Block.<\/p>\n
As part of its expansion, Medco has set up a joint venture
\nwith Britain's Lasmo Oil and Premier Oil to search for gas at the
\nCumi-Cumi field in West Natuna, but no gas has yet to be found.
\nLasmo has 50 percent of the shares, while the remaining 50
\npercent is equally shared by Medco and Premier.<\/p>\n
Medco has also bought the rights for three exploration blocks
\nin Myanmar, but Sugiharto said it was still carrying out
\ngeological and geophysical surveys.<\/p>\n
Projection<\/p>\n
Sugiharto projected the company's profit would substantially
\nrise this year for several reasons, but refused to give detailed
\nfigures.<\/p>\n
In the first place, he said, Medco would increase its profit
\nfrom its drilling rig contracts. Last year's average contract
\nprices rose to $16,000 from $12,500 per day for its onshore
\ndrilling rigs and $70,000 from $46,000 per day for its offshore
\ndrilling rig.<\/p>\n
He said rig contract prices had risen lately due to the
\nincrease in world demand following a fever to hunt for oil in the
\ncentral Asian countries formerly under the Soviet Union.<\/p>\n
Second, Medco, which currently produced 89 MMCF of gas per
\nday, also expected an increase in gas sales, he said.<\/p>\n
The sale of gas to the Tanjung Batu power plant, which was
\ndone only one month last year, will be made full year this year,
\nwhile the sale of gas to the Methanol plant on Bunyu will be made
\nfull year this year, compared with only nine month of sales last
\nyear.<\/p>\n
Medco also supplies gas from the ex-Stanvac fields to the
\nstate fertilizer plant Pusri in Palembang, South Sumatra. The
\nsupply to the fertilizer plant will be increased to 65 MMCF per
\nday this year from 50 MMCF last year.<\/p>\n
Medco sells its gas at $1.33 per million British thermal unit
\n(MMBTU) for Pusri, $1.42 per MMBTU for the Bunyu methanol plant,
\nand $3 per MMBTU for the Tanjung Batu power plant.<\/p>\n
Third, Medco would get more revenues from methanol, which
\nwould be sold for a full 12 months this year, compared with only
\nnine months last year, said Sugiharto.<\/p>\n
The Bunyu methanol plant currently produced about 900 tons of
\nmethanol a day or 90 percent of its capacity. The methanol is
\nsold domestically to plywood producers in dollars.<\/p>\n
Finally, the company also expected more revenue from oil as it
\nwould increase its oil output from the Kaji and Semoga oil
\nfields.<\/p>\n
Medco's oil output now stood at 26,000 bpd, including between
\n10,000 bpd and 11,000 bpd from the Kaji and Semoga oil fields.<\/p>\n
The wells at both fields were still producing below capacity
\nbut Medco at present could not raise the production because
\nPertamina's pipeline to its oil refinery in Musi could not
\naccommodate a larger supply, he said.<\/p>\n
Medco plans to build a 60-kilometer spur to another Pertamina
\npipeline leading to the Musi refinery at a cost of $10.25
\nmillion.<\/p>\n
Sugiharto said when the pipeline was completed in June this
\nyear, the Kaji-Semoga output would rise to 28,000 bpd and 30,000
\nbpd in 1999.<\/p>\n
\"Today, our revenues are 61 percent from oil and gas, 15
\npercent from oil drilling, 10 percent from onshore drilling, and
\nthe rest from methanol. In the future, 70 percent of our revenues
\nwill be from oil and gas,\" Sugiharto said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/medco-energi-basks-in-optimism-despite-crisis-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}