Unocal to triple East Kalimantan gas output

Unocal to triple East Kalimantan gas output

Shigeru Sato, Dow Jones, Tokyo

Unocal Indonesia Co., a unit of U.S.-based energy company Unocal
Corp., plans to triple its production of natural gas from East
Kalimantan, Indonesia, over the next decade to 1 billion cubic
feet a day from the current 300 million cubic feet.

As a first step in the plan to boost output, Unocal will start
production in July at the offshore West Sono field, said Brian
W.G. Marcotte, President of Unocal Indonesia, in an interview
with Dow Jones Newswires conducted on Monday.

Gas from West Seno will be delivered to the liquefied natural
gas plant at Bontang in East Kalimantan, where Unocal currently
provides 8 percent of the facility's gas requirements, Marcotte
said. He was speaking in the margins of the World Gas Conference
in Tokyo.

Unocal has been supplying gas to the Bontang LNG plant since
1979. It is one of the world's largest LNG facilities.

"The country is in the midst of a shift to gas from oil for
the primary energy for development", Marcotte said, adding he
expected the Indonesian government will likely allocate a higher
proportion of funds to its gas industry in the next decade.

The capacity of the Bontang LNG plant will likely be expanded
as Unocal's gas output increases, he said. The current LNG
production capacity at Bontang plant is 22.3 million metric tons
a year.

Marcotte expects capacity to be boosted to 25.3 million metric
tons a year, by the addition of a new 3 million tons-a-year LNG
unit to the existing facility.

Most of the incremental LNG supply would be exported to Japan,
Taiwan, and South Korea, where gas demand is poised to grow more
rapidly in the near-term than in Southeast Asia.

Despite likely fierce price competition in Asia among LNG
producers over the next decade, LNG from the Bontang plant will
be traded at very competitive prices, Marcotte said, noting that
Unocal's gas production costs have fallen sharply in recent
years.

Thailand has been, and in future will continue to be one of
the key countries in which Unocal focuses its oil and gas
investment, he said.

Unocal Thailand is set to invest US$200-300 million this year
in an effort to maintain its gas production levels at 1.1 billion
cubic feet a day, Randolph Howard, Vice President of
International Energy Operations said.

To capitalize on an expected further rise in Thai gas demand,
Unocal plans in early 2006 to start production from the Arthit
field, at some 300 million cubic feet a day.

Discovered in 1999 by PTT Exploration & Production PCL, the
Arthit field is estimated to hold reserves of between three and
six trillion cubic feet.

"Gas from Arthit will be delivered via a new pipeline to be
constructed by PTT," Said Howard.

Thai gas demand is growing sharply, especially, from the
power, household, and petrochemical sectors, Howard said,
expressing confidence in Unocal's future gas business in the
country.

Over the next decade, Unocal estimates its joint ventures will
invest about $4.5 billion on their operations in Thailand. This
figure for capital spending could increase, dependent on
additional exploration and development in Thailand.