Medco, Anadarko sign joint exploration agreement

Leony Aurora, The Jakarta Post, Jakarta

In a bid to intensify efforts to discover more oil, Indonesia's largest oil firm, PT Medco Energi Internasional, and U.S. giant oil explorer Anadarko Petroleum Company have signed a joint venture agreement on exploration activities in the country.

Anadarko will finance Medco's exploration program and cover all risks in the development of 13 blocks owned by the publicly listed company in Indonesia for the next three years, Medco chief of corporate growth Rashid Mangunkusumo said on Tuesday.

"If exploration fails, Anadarko will get nothing," said Rashid. "(However), if it succeeds, the company will get 40 percent of Medco's share in the area," he said.

Anadarko vice president for international business development John Harkins said the company was prepared to channel at least US$80 million into the project over a three-year period.

"The quality of the exploration acreage is excellent," Harkins said.

The 13 blocks include seven new, unexplored areas, including Nunukan and Simenggaris in Kalimantan and six producing blocks, including Tuban in East Java.

With the agreement, which is subject to a due-diligence process scheduled to be completed on Aug. 12, Medco expects to accelerate its exploration activities.

Rashid said the joint venture would allow the company to drill deeper -- something many firms have postponed here due to high costs and risks -- and gain from Anadarko's extensive exploration experience and technology.

Medco has budgeted $130 million for exploration in the next three years, which may be adjusted with the additional funds from Anadarko. This year, Medco is planning to spend between $20 million and $30 million on exploration activities.

The company reported an audited net income of $19.9 million in the first quarter of the year, slightly lower than $20.1 for in the same period last year due to higher costs and taxes. Rising oil prices boosted Medco's net revenues by 18 percent in the period to $130.5 million, from $110.6 million last year.

Medco's share ended Rp 150 (about U.S. 1.5 cents) lower at Rp 3,350 on Tuesday.

Anadarko is one of the world's largest independent oil companies, with assets amounting to $20 billion and proven reserves reaching 2.37 billion barrels of oil equivalent.

Anadarko, through its local unit Anadarko Indonesia Company, was awarded exploration and production rights on the North East Madura III block in East Java last year, its first oil block in the country.

Harkins said the company was "actively interested" in looking into the 27 blocks on offer by the government, but declined to elaborate.