Korea-China partnership find new gas reserve

Fitri Wulandari and Johannes Simbolon, The Jakarta Post, Jakarta

Korea Development Company Energy (KODECO Energy) and partner China Offshore Oil Corporation (CNOOC) have discovered a significant natural gas reserve west of Madura Island, which could help ease the gas shortage in East Java.

KODECO Energy chairman Choi Gye Wol told The Jakarta Post on Thursday that the gas reserve, which is estimated to hold 15 million barrels of oil equivalent worth approximately US$300 million at current prices, was found early this month at the KE 32-1 well of the West Madura offshore block.

"It was a surprise find," Choi remarked.

KODECO has been operating in Indonesia since 1963, but only started oil and gas exploration in the late 1970s.

The company initially started in the timber business in South Kalimantan, and exploration company KODECO Energy was set up in 1982. However, the company could not find significant hydrocarbon reserves for nearly 20 years.

Since late 2001, after it established a partnership with CNOOC, KODECO has been producing crude oil at about 15,000 barrels of oil per day (bpd) and about 100 million standard cubic feet (MMSCFD) of gas per day. KODECO's total oil and gas production is about 30,000 bpd oil equivalent worth a little under $1 million daily.

Aside from the Madura PSC, the firm has also a stake in the Poleng TAC, located in the waters north of Madura.

CNOOC gained a 25 percent interest in Madura and 50 percent in Poleng following its acquisition of all the Indonesian assets of Spanish-Argentinean energy giant YPF-Repsol.

"This has placed our company in the middle rank among world independent oil producers," Choi said.

He said KODECO would use its portion of revenue from the oil and gas fields to support its forestry and plantation business here.

KODECO still has several forest concessions in Kalimantan and Papua.

Prior to the discovery of the KE 32-1 well, based on calculations approved by independent consultant Ryders & Scott, the combined proven oil and gas reserves at the Madura and Poleng blocks could generate $1.6 billion in revenue from 2002 to 2013, while probable reserves in both blocks could produce up to $3 billion in revenue from 2003 to 2017.

Aside from adding to KODECO's and CNOOC's hydrocarbon assets in the country, the discovery of the new well could also ease gas shortages that have been troubling East Java for several years.

State electricity company PT PLN, the main buyer of natural gas in the province, has been forced to suspend its East Java gas plants several times, causing blackouts across parts of Java.

Aside from KODECO, Australia's Santos, Anglo-American firm BP Plc, American firm Amerada Hess and local firm Lapindo Brantas also operate in the province.

In September 2002, in a meeting with the House of Representatives, upstream authority BP Migas head Rachmat Sudibyo said East Java's gas demand was projected to increase to 573 million cubic feet per day (MMCFD) in 2007, from 424 MMCFD in 2003. The supply dropped this year to 290 MMCFD, due to the decreasing supply from BP.