Korea-China partnership find new gas reserve

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.