Gulf Indonesia eyes gas sales to Malaysia

Gulf Indonesia eyes gas sales to Malaysia

SINGAPORE (Dow Jones): Gulf Indonesia Resources Ltd. is upbeat on selling natural gas to Malaysia from the Suban discovery in the Corridor production sharing contract, South Sumatra, company chief executive Bill Fanagan told Dow Jones Newswires in an exclusive interview Thursday.

"The signs are positive," Fanagan said of the ongoing negotiations about the gas sales between Gulf Indonesia and Malaysia's state oil company, Petroliam Nasional Bhd., or Petronas.

Gulf Indonesia's key focus this year will be "to find the next gas contract," Fanagan said of Gulf's commitment to developing more gas projects.

Gulf plans to spend US$60 million, or 40 percent of its total capital investment this year, on onshore gas appraisal and development in South Sumatra in 2001.

Fanagan said Gulf Indonesia plans to invest US$35 million this year to appraise the Suban discovery in South Sumatra, which is projected to contain proven and probable gas reserves of approximately 3 trillion standard cubic feet.

The company will drill three appraisal wells this year on the Suban discovery, with the drilling of the first one scheduled to commence in April, the official said.

Gulf Indonesia plans to invest US$35 million in 2001 on infrastructure for its contract to supply Suban gas to PT Caltex Pacific Indonesia.

PT Caltex Pacific is a fully-owned unit of Caltex Corp. (P.CXX) - which is a joint venture between Chevron Corp. (CHV) and Texaco Inc. (TX).

Gulf Indonesia will supply 120 million cubic feet a day of compressed gas by mid-2002 - ramping up to 180 mmscf/d by mid- 2003 - to Caltex Pacific Indonesia's steamflood project, the Gulf CEO said.

Gulf Indonesia will spend US$10 million this year to install the new gas compression plant, he said.

Gulf Indonesia and its partners already provide 305 mmscf/d of natural gas to Caltex Pacific's Duri steamflood project, from its Corridor PSC in South Sumatra.

The steamflood project supplies steam to Duri to maintain the prolific field's current production capacity of 300,000 barrels a day.

Gulf Indonesia is the operator of the Corridor PSC with a 54% share, while partners, Talisman (Corridor) Ltd., a unit of Canada's Talisman Energy Inc. (TLM), holds a 36% stake. Indonesia's national oil company, Pertamina (P.PTM) holds the remaining 10%.

Gulf Indonesia will also supply 700 billion cubic feet of gas to Singapore from 2003, following an agreement signed between Pertamina and Singapore Power in February. Gulf Indonesia and its partners will supply a total 2.27 trillion cubic feet of gas to Singapore over 20 years, from Asamera fields in the Corridor Block and South Jambi B Block PSCs.

Gulf Indonesia - which holds 45 percent interest in the South Jambi B Block - will spend $15 million this year on developing gas for the Singapore Power project. Partner Santa Fe Energy Resources holds 30 percent, while Pertamina holds 25 percent.

While Gulf Indonesia is pushing ahead with gas development plans in South Sumatra, it has chosen to freeze gas plans at the Block A PSC in Aceh because of ongoing political conflicts in the area.

Plans are on hold, as Gulf Indonesia monitors Exxon Mobil Corp.'s decision to suspend its onshore Aceh operations following increasing social unrest in the "politically challenged" area, Fanagan said.

There are proven and probable reserves of 500 billion cubic feet of gas in the Block A PSC, Gulf Indonesia's first. The Block A PSC started producing oil in the late 1960s and its production peaked at 23,000 barrels of oil a day in the early 1970s before output declined over time to almost nothing, Fanagan said.

Gulf Indonesia is meanwhile working with Pertamina to sell gas from Block A PSC to local fertilizer plants, Fanagan said. Exxon Mobil holds a 50 percent share in the Block A PSC.

Developing Block A would require an investment of $200 million, Fanagan said.