Eni requests rescheduling of work in Ambalat block

Eni requests rescheduling of work in Ambalat block

Leony Aurora, The Jakarta Post, Jakarta

On the back of the ongoing territorial dispute between Indonesia
and Malaysia, Italian oil giant Eni SPA has asked for a
rescheduling of its exploratory work in the disputed Ambalat oil
block, a top official says.

The company, whose local unit, Eni Ambalat Ltd., manages the
block, wants to slow down its activities offshore East Kalimantan
until the situation had improved, said chairman of the Upstream
Oil and Gas Regulatory Agency (BP Migas), Kardaya Warnika, on
Wednesday.

"We cannot force people to work in an area where they are not
comfortable," said Kardaya after meeting with members of the
House of Representatives.

Patrolling warships in the disputed area could disrupt Eni's
exploratory drilling work, he added.

Indonesia launched a major protest a few months back after
Malaysia's state oil company Petronas awarded a concession to
international oil giant Royal Dutch/Shell to work on blocks ND6
and ND7.

The government claimed that the blocks were located within
Indonesian territory and overlapped with its own oil and gas
blocks, Ambalat and East Ambalat. The two countries are currently
engaged in negotiations and are scheduled to meet every two
months in an attempt to settle the issue.

Eni holds the concessions for Ambalat and the nearby Bukat
block until 2029 and 2028 respectively, while U.S. firm Unocal
was awarded the right to explore in East Ambalat late last year.

Kardaya said that Unocal had yet to submit any rescheduling
plans as it was still conducting initial studies, which were
expected to be completed this year.

He further said that because the Ambalat block was adjacent to
Bukat -- the latter being entirely within undisputed Indonesian
territory -- the two blocks needed to be investigated together.
Consequently, Eni would also delay its work in Bukat.

"Eni has drilled three exploratory wells in Bukat and the
results were promising," Kardaya told legislators during the hearing.
Initial estimates reckon that the block holds reserves of up to 1
trillion cubic feet of gas and 400 million barrels of oil, he
added.

Eni has also drilled a well in Ambalat, but this came out dry.
"However, the results from Bukat show that Ambalat could have
good reserves as well," said Kardaya.

Eni as the contractor had been required to drill another well
this year in Ambalat.

The Ministry of Energy and Mineral Resources' director general
of oil and gas, Iin Arifin Takhyan, said that the government
understood Eni's position.

However, he added, "their commitments are not only limited to
physical development. They can move forward in the meantime with
other work, such as budgeting."

In 1999, Shell was awarded a production sharing contract by
Indonesia to investigate hydrocarbon prospects in the area, but
the company terminated the agreement two years later and handed
the concession over to Eni.

Some local media here have speculated that Shell offloaded the
concession after finding only small amounts of oil and gas, but
then turned around and participated in the Petronas tender after
learning of the large volume of reserves in the area.