Gulf Indonesia budgets US$40m to explore

Gulf Indonesia budgets US$40m to explore

Nick Edwards, Reuters, Hong Kong

Indonesian oil and gas firm Gulf Indonesia Resources Ltd., whose onshore wells in Sumatra are drying up, said on Wednesday it would spend up to US$40 million a year to find fresh reserves after striking oil in Java last year.

"We intend to spend $120 million this year, plus or minus, and getting on for a third of that would be for exploration. Exploration is going to be part of our future," President and Chief Executive Paul Warwick told Reuters.

The firm, which had 303 million barrels or equivalent of proved oil and gas reserves as at end 2001, found both at its Ketapang operations in Java is now doing a seismic survey of the area, but said it was too early to say how big the find was.

"We'll probably drill some wells in the early part of next year, depending on the completion of the seismic survey," he said.

Some 94 percent of the proved reserves of Gulf Indonesia, majority owned by Conoco Inc. of the United States, are in South Sumatra.

"Our onshore operations in South Sumatara are at the end of their life as such, but there's probably a long tail to that life...but they are not going to be the long term oil future," he said, despite the possibility of adding small, incremental finds in the locality in future.

Warwick said Indonesia's new petroleum laws passed in November, which herald the break up of state oil giant Pertamina, could put new emphasis on future development of smaller wells.

But Warwick, speaking on the sidelines of investment bank Credit Suisse First Boston's annual investment conference in Hong Kong, said the biggest potential for his firm was in natural gas, which represented about 90 percent of Gulf Indonesia's business.

"Our gas business is a great business. There's a lot of potential, we're working that potential and some of it is going to come out," he said.

Investors have been cheering that potential in recent weeks, pushing up the firm's New York-listed stock some 20.6 percent to $10.19 as of Tuesday from its year low of $8.45, marked on February 26.

"Basically we do have a very good growth story," Warwick said.

"We've sold gas to Caltex in a second contract and we have a gas sales agreement from our West Natuna field into Singapore as well. That growth is tangible, the projects are on schedule and as an organization, we're doing the right things," Warwick added.

The market is also eying an anticipated bid by Gulf Indonesia as part of one of four consortia slivering over a stake in a $9 billion pipeline contract to transport gas from Indonesia to Singapore.

The deal, in which Indonesian gas distributor PT Perusahaan Gas Negara is selling a slice of the pipeline to comply with loan requirements of multilateral lenders to Jakarta, is set to close by the end of this month.

Warwick declined to comment on the specifics of the bid or if a bid would be delivered by the March 26 deadline.

"I think the pipeline will be built and I think it will be built on schedule. there are people in the frame who would like to be part of that strategic investor process. will we be part of it? I don't know," he said.

"We, along with lots of others, took an initial look at it and it's a utility project and utility projects attract players from around the world who want to part of it," Warwick said.

A soaring oil price to six month highs of more than $25 per barrel may also have played a part in the rocketing share price, Warwick conceded.

"I think $25 is cream for us. If it's over $25 I'm very happy, if it's at $20 I am not unhappy, if it's $15 I'm probably beating up my colleagues, but I'm not going out and taking a night time job to raise money for the company," he said.