Unocal to apply cheap technology to new reserves

JAKARTA (JP): Oil and gas company Unocal Indonesia, a subsidiary of the giant United States energy company Unocal Corp., will apply low cost technology to the development of its new oil and gas contract areas in the Makassar Straits and South Sulawesi.

State oil and gas company Pertamina spokesman Ramli Djaafar said in a statement on Saturday that Unocal would explore the Sengkarang block offshore South Sulawesi and the Lompa block in the Makassar Straits with its Saturation Exploration (SX) technology.

The company can drill deepwater wells in both blocks for as little as one-third of the normal cost of conventional wells, Ramli said.

"Low cost exploration approaches and an optimum work commitment will allow Unocal to explore these areas as efficiently as anyone in the industry," Ramli said.

Unocal signed production sharing contracts (PSCs) for the development of the Sangkarang and Lompa blocks on Nov. 16.

The two blocks lie approximately 480 kilometers south of Unocal's production operations offshore East Kalimantan.

The Sengkarang PSC covers nearly 7,957 square kilometers offshore South Sulawesi, while the Lompa PSC covers nearly 10,268 square kilometers in the Makassar Straits.

The primary areas of interest lie in water depths ranging from 1,000 feet to 3,100 feet (300 meters to 900 meters).

"Sangkarang and Lompa are the fifth and sixth PSC areas that Unocal has added to its Indonesian portfolio in the past two years," Ramli said.

Unocal holds a 100 percent working interest in the new PSC areas through its subsidiaries, Unocal Sangkarang Ltd and Unocal Lompa Ltd. The company will spend about $24.5 million for the exploration of each block over the next ten years.

Ramli said both blocks were categorized as frontier areas, qualifying Unocal for a net production share of 35 percent for oil and 40 percent for gas.

Under PSCs for conventional areas, the government takes 85 percent of the oil output of contractors and 70 percent of their gas output.

But, the government has introduced incentive packages to encourage exploration in deepwater and frontier areas. Under the incentive packages, the government reduces its shares to 65 percent for oil and 60 percent for gas for deepwater and frontier areas.

Unocal is presently delineating two significant deepwater discoveries in West Seno and Merah Besar offshore East Kalimantan.

Under a production-sharing contract with Pertamina, Unocal operates nine fields offshore East Kalimantan. It holds a 100 percent working interest in eight fields -- including Santan, Serang, Sepinggan, Melihin, Kerindingan, Seguni, Pantai and Yakin -- and a 50 percent working interest in the super-giant Attaka field.

Current gross daily production is approximately 77,000 barrels of oil and nearly 300 million cubic feet of gas. All of the production is in water depths of less than 300 feet (100 meters). (jsk)