Medco sees oil production to drop next year

Rendi A. Witular, The Jakarta Post, Jakarta

Publicly listed energy company PT Medco Energi Internasional said on Tuesday that its oil production in 2004 would drop by 14 percent on depleted reserves, forcing the company to boost gas production to compensate for a possible decline in sales.

Medco operations director Rashid Irawan Mangunkusumo said the firm's oil output was forecast to reach 60,000 barrels per day (bpd) next year, down from an estimated 70,200 bpd this year.

"Reserves in most of our oil fields, especially in our largest fields Semoga and Kaji, have been exploited by 50 percent .... In that condition, production will naturally decline," said Rashid during a public expose on Tuesday.

He said the company's proven oil reserves could only last for four years, while its proven and probable reserves would run out in 12 years.

According to its report, Medco's proven oil reserves now stood at 147 million barrels, while its proven and probable reserves were 264 million barrels. The firm's proven gas reserves stood at 126 billion cubic feet (BCF), while its proven and probable gas reserves were 2,940 BFC.

Medco finance director Sugiharto said that due to the huge discrepancies between the company's gas and oil reserves, Medco had decided in the future to become a gas producer, rather than an oil producer.

In relation to that, he said the company would boost its gas production in 2004 by 46 percent to 120 million cubic feet per day (MMCFD) from the 82 MMCFD estimated for this year, in order to compensate for the decline in oil production.

"For the time being, our gas production, although small, could adequately offset the decline in our oil production," he said.

Currently, Medco sells its gas to the local market with a price of around US$2 per million British Thermal Unit (MMBTU), and is expecting to export its gas product to the U.S. in 2009, after completing the development of the Senoro gas field in Sulawesi.

Sugiharto said the company had allocated capital expenditure of $124 million for exploration and $300 million for acquisition next year in order to help boost the company's gas and oil production.

He explained that the capital expenditure would be partly financed by the company's internal cash of $233 million. The remainder would be financed from bank loans and bond issues.

The company, which was founded by businessman-turned- politician Arifin Panigoro, was also considering selling its treasury shares next year, which reached 6.8 percent of the company's total shares, if its capital expenditure for next year exceeded the planned allocation, Sugiharto said.

This year, Medco expected its full-year sales revenue to reach $447 million, up from $421 million last year, mainly on the increase of oil price to $27.4 per barrel from $25.3 last year.

The company also expected its net profit this year to reach at least $84 million, the same amount it booked last year.

Next year, Sugiharto projected the company's sales revenue to grow by between 10 percent to 15 percent.

Currently, Medco has 14 gas and oil concession fields, seven of which are now in production and the remaining still at the exploration stage.