EMP to spend $400m on Kangean field

EMP to spend $400m on Kangean field

Leony Aurora, The Jakarta Post/Jakarta

After extending its contract in the Kangean oil and gas block in
East Java, PT Energi Mega Persada (EMP) is ready to spend US$400
million to develop Terang Sirasun, a major gas field there, and
expects production to start in 2007.

The Terang Sirasun field would produce between 300 million
standard cubic feet per day (mmscfd) and 350 mmscfd of gas by
the fourth quarter of 2007 at the latest, said Suluhudin Noor,
senior vice president and general manager of EMP Kangean Ltd, a
subsidiary of EMP.

"We have submitted the plan of development, which basically
has been approved, pending the availability of funding," Noor
said on Friday. He declined to mention the funding schemes for
the project.

Noor said the tender for engineering planning was already
underway, with four local and international companies bidding.
"We will announce the winner at the end of this month," he said.

"Construction is expected to begin six months from now."

EMP acquired the rights to exploit Kangean from its former
operator, Anglo-American energy giant BP Plc., for $160 million
mid last year.

The government awarded a contract extension of 20 years to
develop the block late last year, which gives EMP until year 2030
in total to extract as much oil and gas as possible.

With domestic fuel becoming increasingly expensive due to the
government's decision to gradually reallocate subsidies and
soaring global oil prices, industries are turning to gas as one
of the most probable fuel alternative.

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.

Of the three major gas fields discovered within the block,
namely Pagerungan, Terang Sirasun and Batur, only the first is
producing gas, at between 85 mmscfd and 90 mmscfd.

For 2004, the company has prepared some $200 million in
capital expenditure. "One of our programs is to optimize
Pagerungan," said Noor.

"By this year's fourth quarter, we expect to increase gas
output to between 120 mmscfd and 140 mmscfd," he added.

Some 50 mmscfd of gas currently produced by Pagerungan goes to
the province's fertilizer plant Petrokimia Gresik, while state-
controlled gas distributor PT Perusahaan Gas Negara takes up to
24 mmscfd.

Noor said there was about 400 mmscfd of gas shortage in East
Java, providing that all major industries switch to the more
environmentally-friendly fuel.

EMP is controlled by the Bakrie Group, a business conglomerate
run by the Bakrie family of the current Coordinating Minister for
the Economy Aburizal Bakrie.