EMP to spend $58 million on marginal fields

Leony Aurora, The Jakarta Post, Jakarta

Local oil and gas firm PT Energy Mega Persada (EMP) will spend US$58 million to develop its two marginal fields and cash in on an incentive recently offered by the government.

President director Rennier AR Latief said that the company would be able to recover 20 percent more of its incurred cost, equal to almost $70 million.

"We have two marginal fields that we want to develop in Kangean," he said on Thursday, referring to the oil and gas block in East Java that the company acquired from Anglo-American energy giant BP Plc. last year.

The government announced the incentive earlier this week to make marginal fields -- defined as fields within a producing block, which under the current production sharing contract (PSC) terms and conditions, has a rate of return (ROR) of lower than 15 percent -- more attractive to investors.

"We fit the requirements, so we get the incentive," said Rennier.

The two fields are expected to produce 10,000 barrels of oil per day within one year.

EMP, controlled by Bakrie Group, also announced that its net profit for 2004 reached Rp 74.2 billion ($7.82 million), almost fivefold higher than Rp 15.36 billion booked in the previous year.

Despite the high growth, the company missed the target of Rp 189.5 billion set in the prospectus for its initial public offering last year, citing higher deferred taxes.

Surging oil prices sent revenue to reach Rp 855 billion in 2004, up from Rp 513.12 billion recorded a year earlier.

Last year, the company found a new gas reserve of 330 billion cubic feet (bcf) in its block in the Malacca Strait. "We will produce some 60 million standard cubic feet per day (mmscfd) in 2006," said Rennier.

EMP already has the capacity to produce 20 mmscfd, of which a quarter is used for the company's own use. "We are negotiating with (state power firm) PLN to see if they want to buy the gas," said Rennier.

Aside from the new gas reserve, the firm also found 14 million barrels of oil reserve and 10 bcf of gas reserve in Tanggulangin field, located within the Brantas block in East Java.

Rennier further said that the company was not interested in participating in new oil and gas block tenders. "We have only explored 20 percent of our own blocks," he said. "Our policy is to develop them or acquire other producing blocks that have good exploitation potential."

The government is scheduled to offer 46 oil and gas blocks, of which 13 were proposed by investors, 23 leftovers from previous years and 10 new ones, in May.