Medco, Anadarko sign joint exploration agreement

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.