Bakrie firm awarded extension for oil block

Bakrie firm awarded extension for oil block

Dadan Wijaksana, The Jakarta Post, Jakarta

PT Energy Mega Persada (EMP), a local oil and gas firm controlled
by the Bakrie Group, will be awarded a contract extension of 20
years to develop giant Kangean oil and gas block in East Java,
according to government officials.

Iin Arifin Takhyan from the directorate general for oil and
gas at the energy ministry, said the government and the EMP were
finalizing the negotiations, with the signing of the new contract
expected to take place on Dec. 12.

"We're still finalizing the details, but we expect to complete
it before Dec. 12, when we hope to sign the new contract, which
will extend EMP's rights to develop the Kangean block for another
20 years," Iin told The Jakarta Post on Thursday.

The block was previously operated by Anglo-American energy
giant BP Plc., which sold the block to EMP in July this year.
Since the acquisition, EMP has been lobbying for an extension of
the current contract, which expires in 2010.

Efforts to seek confirmation from the firm were unsuccessful.

There have been three major gas fields discovered within the
block, that is Pagerungan, Terang Sirasun and Batur.

To date, only Pagerungan has actually produced gas. Data from
the Oil and Gas Upstream Regulatory Body (BP Migas) shows that
Pagerungan field can produce between 150 million and 175 million
standard cubic feet per day (MMSCFD) of gas.

A contract extension would allow EMP to explore and develop
the Terang Sirasun field, which is believed to have abundant gas
deposits.

In total, the Kangean block has reserves estimated to be 2.6
trillion cubic feet of gas, including about 1.3 trillion cubic
feet of certified (proven) reserves.

With such an amount, Kangean is expected to generate billions
of dollars in income for EMP, which bought the block from BP for
only about US$160 million.

By comparison, in August this year, U.S. energy firm
ConocoPhillips signed a contract to sell a total of 2.3 trillion
cubic feet of gas from its fields in central Sumatra to
Perusahaan Gas Negara (PGN), the state gas distribution company,
for a reported price of US$4.3 billion. The gas will be delivered
to West Java and Banten.

Elsewhere, the ministry's Director for Oil and Gas Novian M.
Thaib, also confirmed that the negotiations were nearing
completion.

"Basically what we're trying to seek in the negotiations is
the company's commitments on using the natural gas it produces to
boost the supply and meet the increasing gas demand in the
province," said Novian.

Based on BP Migas data, natural gas demand in East Java for
power plants, gas distribution firm PT Perusahaan Gas Negara
(PGN) and petrochemical companies reached 424 MMSCFD in 2002.

It is projected to increase to 573 MMSCFD by 2007.

EMP is controlled by the Bakrie Group, a business conglomerate
run by the Bakrie family. The current Coordinating Minister for
the Economy Aburizal Bakrie was a former top executive in the
family firm.