CEB, PTAG sign Tuba Obi East study agreement

By Romel S. Gurky

LSE-listed CEB Resources plc said it has agreed with PT Akar Golindo (PTAG) to assess the technical and commercial opportunities for monetizing gas in and around the Tuba Obi East oil and gas concession in the South Sumatran Basin.

Under the terms of the agreement CEB and PTAG will undertake a technical evaluation of the gas production potential of the Tuba Obi East Technical Assistance Contract (TAC), along with surrounding undeveloped gas discoveries to provide a detailed assessment of potential opportunities in the region, CEB said in a statement Wednesday.

Key features of the TAC identified during the initial screening and evaluation process include multiple oil and gas discoveries within the block; ongoing oil production via existing facilities; gas productivity tested, yet undeveloped, in two different reservoir zones; exploration prospects and leads within the TAC; and additional undeveloped gas tested in multiple discoveries adjacent to the TAC.

Crucially the studies will investigate both the potential to sell the gas directly to the Singapore market, the Duri steam-flood project, or other buyers via the major transmission gas pipeline, about 12 kilometers away. Alternatively there is the opportunity to monetize the gas via the construction and operation of an independent power plant, selling electricity into the Sumatran power grid, CEB explained.

CEB sees the gas and power market in Indonesia as an opportunity that should form part of its long-term balanced asset portfolio. Importantly the gas price is independent of the oil price. This was demonstrated in January this year when a Sumatran gas project secured a long-term gas sales contract at US$ 9.45 per Million British Thermal Units (MMBTU), which is amongst the highest gas prices in the world. Similarly, the demand for electricity continues to rise sharply with the country's electricity provider PLN setting the ambitious goal of increasing supply by some 35,000 MW over the next 4 years. With only 9,000 MW having been firmed up thus far, CEB believes that investment in this sector is particularly attractive.

CEB's Managing Director, David Whitby, said: "At present we are operating in a target-rich environment and fully intend to utilise our experience and in-country presence to take advantage of opportunities that have the potential to generate cash flow and enduring value for our shareholders. The signing of the Tuba Obi East study agreement is instrumental in the realization of our long-term strategy, representing a beach head into the attractive Indonesian gas and power markets. This initiative complements our oil studies which are progressing very well."

Editing by Reiner Simanjuntak