Premier plans to drill in newly acquired Vietnam blocks

Premier plans to drill in newly acquired Vietnam blocks

Bloomberg, London

Premier Oil Plc, a U.K. oil company, is targeting drilling in
the second half of 2005 in newly acquired Vietnamese offshore
blocks, which includes territory that was disputed with Indonesia
until last year.

Premier this year bought the rights to two blocks in
Vietnamese waters in the South China Sea, as well as two others
over which sovereignty was disputed for 25 years until an accord
on the sea boundary was signed during a June 2003 visit to Hanoi
by Indonesian President Megawati Soekarnoputri.

The Vietnamese areas are geologically similar to Indonesia's
West Natuna where fields, in which Premier invested, are
producing about 235 million cubic feet of gas and 12,000 barrels
of oil per day, according to Robin Allan, director of business
development for the London-based company.

"These blocks are highly prospective for oil and gas," Premier
said yesterday in a statement to the London Stock Exchange. "The
focus of our efforts in 2005 will be to identify and drill
prospects of sufficient size to permit early commercialization."

Premier said in May it had agreed to buy a 75 percent stake
from Israel's Delek Energy Systems Ltd. in Vietnam's blocks 12E
and 12W, located in waters that are not in dispute.

The company also said then that Vietnam American Exploration
Co. had agreed to give Premier the right to acquire as much as 68
percent of its Vietnamese blocks 7/97 and 8/97 by funding a
drilling program. Blocks 7/97 and 8/97, south of two Vietnamese
gas fields controlled by BP Plc, are in the area previously
disputed with Indonesia.

Premier would like to drill next year on both the areas it
acquired from Delek as well as the previously disputed acreage,
said Allan.

"But for the blocks in the border area, although the border
has been agreed it has not been ratified," said Allan in a
telephone interview. "I don't think we'd be able to drill there
until the agreement is ratified, which we hope will take place
after the Indonesian elections."

Indonesians go to the polls on Monday to choose between
Megawati and Susilo Bambang Yudhoyono.

The previously disputed area has "relatively good gas
potential in the east," said Mark Valencia, a Hawaii-based expert
on maritime policy and boundary disputes. "There's an area off
the east coast of Malaysia that has oil, but it tends more toward
gas as you get further out."

Vietnam and Indonesia relied on the 1982 United Nations
Convention on the Law of the Sea and principles of international
law and customs to reach a "realistic solution," Vietnam's
Foreign Ministry said last year.

"It appears that Vietnam gave up quite a bit from its original
position," said Valencia. "It looks like Vietnam has been willing
to bargain."

Vietnam is one of several countries claiming sovereignty over
the Spratly Islands, which consists of more than 100 small
islands or reefs in the South China Sea.

Last week, Vietnam's government expressed concern and asked
for information about an accord between government-controlled oil
companies from the Philippines and China to carry out "scientific
research" such as gathering geological data on the Spratlys.

Vietnam Oil and Gas Corp. has expressed interest in joining
the Philippines and China in the study and "appropriate
discussions are being arranged," Philippine National Oil Co.
President Eduardo Manalac said yesterday in Manila.