Unocal to lead deepwater oil and gas development
By Johannes Simbolon
JAKARTA (JP): Oil and gas company Unocal Indonesia Company, a subsidiary of the giant United States energy company Unocal Corp., is set to put itself in the position of leader in developing the country's oil and gas deepwater resources.
Last year, the company impressed the country's oil and gas industry, which had rarely seen a huge oil discovery over the past decade, with its combined oil and gas discovery in the Merah Besar field of the Kutai basin in the deep water of the Makassar Straits.
It announced a similar huge discovery in its Seno field of the same block in August this year.
The block is operated and 50 percent owned by Unocal and the remaining 50 percent shares belong to the Mobil Oil Indonesia Inc, a subsidiary of the U.S. energy giant Mobil Oil Corp.
The water in the Merah Besar field is less than 2000 feet (600 meters) and at Seno 3000 feet (1000 meters) deep.
This year, Unocal signed three other production-sharing contracts (PSC) for the exploration and development of oil and gas resources in the deepwater areas off East Kalimantan and South Sulawesi.
It signed two of the three deepwater PSCs last Monday, that is for the development of the 7,957 square kilometer Sangkarang block and the 10,268 square kilometer Lompa Block, both offshore South Sulawesi. These blocks, which have water to depths of 3000 feet, are wholly owned by the company.
Another PSC was signed by the company in February for the exploration of the 5,050 square kilometer Ganal block also in the Makassar Straits.
The Ganal block is 90 percent owned by Unocal and 10 percent by the Nusamba group. But the company is currently seeking to take over Nusamba's shares.
Unocal Indonesia president Timothy C. Lauer admitted the company's leading position in the development of the country's oil and gas resource but denied it would focus on developing the country's deepwater oil and gas resource.
"First thing, we focus on the geological values of the block, how good are they, and the chances of finding oil and gas."
"But, when we can use our technology, particularly our deepwater Saturation Exploration (SX) type drilling technology, we want to leverage that. Because we can drill wells very cheaply compared to the rest of the industry," Lauer told The Jakarta Post on Monday on the sidelines of the ceremony to sign ten oil and gas contracts, including Unocal's contracts, at state oil and gas company Pertamina's headquarters.
The government launched several incentive packages from 1988 to 1993 to encourage the exploration of the country's oil and gas resources in deepwater and frontier areas and the use of tertiary enhanced oil recovery (EOR) technology in mature fields in light of the dwindling reserves in the productive wells in conventional areas.
The country's oil and gas resources were estimated at 73.3 billion barrels of oil and 307.95 trillion cubic feet of natural gas as of last year. The resources are buried in 60 sedimentary basins, of which only 36 have been explored.
Net importer
International oil consultancy firm Wood McKenzie has predicted that Indonesia is likely to become a net oil importer in the middle of the next decade, given the lack of oil discovery over the past decade and continued growth in domestic demand.
The country's oil production has remained 1.5 million barrels per day (bpd) over the past several years but its exports continued to decline to 600,000 bpd to last year due to the growth of domestic demand.
McKenzie predicted that in 2006 Indonesia will turn into a net oil importer when the domestic consumption reaches 1.2 million bpd.
President of the United States-based Unocal Corp. John F. Imle recently said that Unocal's discoveries in the Merah Besar and Seno fields will refute the prediction.
"Industry observers predict that Indonesia will become a net oil importer by the middle of next decade. Hopefully, the new deepwater 'oil boom' -- when it occurs -- will push Indonesia's status as a net oil importer much further into the future," Imle said during the last month's 26th Indonesian Petroleum Association (IPA) Convention.
According to him, the Merah Besar and Seno fields have a combined gross resource potential of between 300 and 870 million barrels of oil equivalent.
Pertamina's expert staffer Zuhdi Pane said on Friday during the Indonesia Forum business conference that Unocal's Makassar Straits block will become the country's oil production center in the coming 10 years aside from the oil blocks in the province of Riau owned by PT Caltex Pacific Indonesia, a joint venture of the U.S. giant energy companies Chevron and Texaco.
Lauer said Unocal will start developing its Merah Besar and Seno fields by 2001.
Lauer said the company will invest above US$800 million to develop both fields, including $275 million for the Merah Besar field.
He said Unocal expects to file with Pertamina its plan of development for the Merah Besar field before the end of the year and it plans to finish delineation of the Seno field this year.
According to Lauer, the company has set up two teams in the U.S. and Indonesia, which include Pertamina and Unocal engineers, to develop the deepwater facilities which will enable the company to exploit petroleum in both fields at a relatively low cost. Two Pertamina engineers will go to the U.S. in December for that purpose.
"Even at today's prices (of between $12 and $14 per barrel), we think we can develop these fields economically," Lauer said.
Unocal entered Indonesia in 1968 with the signing of its first PSC contract for the development of the West Pasir onshore and offshore block in East Kalimantan. The company extended its contract on the block last month.
The company also operates and owns a 60 stake in the Teweh onshore block in Central Kalimantan, wholly owns the Sesulu offshore block in East Kalimantan.
It has also 90 percent shares in the Rapak deepwater block offshore in the Makassar Straits in a partnership with the Nusamba group, but it is seeking to take over Nusamba's shares.
According to Pertamina data, Unocal produced 95,690 bpd of oil last year making it the country's fourth largest oil producer. It is also the fifth largest natural gas producer with an output of 327 million cubic feet per day.