Petronas ties up with Esso for new gas contract

Petronas ties up with Esso for new gas contract

KUALA LUMPUR (AFP): A unit of Malaysia's national oil company
Petroliam Nasional Bhd. (Petronas), Petronas Carigali, yesterday
sealed a gas production sharing contract with Esso Production
Malaysia Inc.

Visiting Exxon Corp. chairman Lee Raymond said the contract,
effective next January, would cover development of natural gas
from 15 fields under Esso and Petronas Carigali.

Each would hold a 50 percent interest under the production
sharing contract (PSC), which would also provide for the sale of
gas produced to Petronas, Raymond said.

"New platforms and associated infrastructure will be installed
over the next 15 years to develop gas resources included the new
PSC," Raymond told reporters.

"Significant modications will also be made to existing
operating platforms to provide for gas cap production. We project
total investment to be almost 12 billion ringgit (US$4.8
billion)," he said.

The contract would also involve the integrated development of
the Angsi oil and gas field, the first large scale combined oil
and non-associated gas development to be installed offshore
peninsular Malaysia.

"Engineering work on this field will begin immediately, with
first production scheduled in 2002," Raymond added.

Petronas president and chief executive Hassan Marican said the
agreement would consolidate the development of offshore gas
fields in Malaysia presently under both Esso and Petronas
Carigali.

The agreement would secure long-term gas supply to the
Peninsular Gas Utilisation project, which provides the pipeline
infrastructure for gas supply to refueling outlets in rural
areas.

The multi-phased project, developed by Petronas, comprises
1,200-kilometer (745-mile) of pipeline linking all its processing
plants which spans the length of peninsular Malaysia.

Hassan said the production sharing contract was aimed at
optimizing cost and enhance operational efficiency through the
sharing of infrastructure, and would allow Petronas to meet
rising gas demand in Malaysia.

Petronas would award selected gas fields and reservoirs and
its gas-cap fields to the two contractors. Esso is to operate gas
facilities in the northern region while Petronas Carigali would
handle the southern region.

Esso is also to surrender to Petronas all but two of the
undeveloped gas fields awarded to the company under a 1990
agreement.

Hassan said the estimated gas reserves in the fields stand at
about 12.5 trillion standard cubic feet, of the country's 85.1
trillion standard cubic feet of natural gas reserves.

Combined sales from the new contract and the 1990 agreement
with Esso are expected to meet two-thirds of the projected gas
demand in Malaysia for the next 25 years, he said.

Earlier, Exxon's Raymond said both Esso and Petronas Carigali
produce more than 400,000 barrels of oil from their offshore
joint venture operations, accounting for more than half of the
nation's output.

The two companies were also supplying the entire demand of
more than 1,300 million cubic feet of gas to Malaysia and
Singapore, he said.

Esso earlier this year signed two new contracts with Petronas
Carigali to explore oil fields in the eastern state of Sabah on
Borneo island after an absence of 11 years.

Malaysia produces 630,000 barrels of oil a day, excluding
condensates and 3.4 billion standard cubic feet of natural gas,
officials said.