EMP and Medco formally express interest to buy Aceh Block A
Thursday, August 18 2005 - 01:37 AM WIB
ExxonMobil Oil Indonesia senior official Maman Budiman told Petromindo.Com that the company has yet formally opened the bidding to find most suitable buyer and said that the data room would be opened in the second or third week of September. He did not say when the process is expected to be completed.
Aceh Block A PSC is estimated to contain around 500 BCF of natural gas. Gas from the block, which is operated by ConocoPhillips (50 percent interest holder), is designated to be supplied to Aceh fertilizer firm PT Pupuk Iskandar Muda, which is currently facing acute gas shortage after its supply contract with ExxonMobil, currently the sole Aceh gas producer, expired.
Block A participants have delayed the development of the block, citing that the development of the block was not economically feasible given the high CO2 content of its gas, unless the government offered a more generous production split. Apart from technical reason, poor security condition in the rebel-infested province was also seen as the reason of delayed development and ExxonMobil’s decision to sell interest in the block.
The government then proposed to lower its share of the block’s gas output to 52 percent, offering the remaining 48 percent to contractors. But, both firms insisted on a 50-50 percent production split.
The government has insisted that the block’s plan of development must be completed within the next few months and the gas must become onstream 2009.
Earlier, Minister of energy and Mineral Resources Purnomo Yusgiantoro said that ConocoPhillips also wants to sell its interest in the block, but ConocoPhillips Indonesia would not comment on the matter.
An industry source who is familiar with Aceh Block A said with peace in Aceh progressing, the block has become increasingly attractive and may prompt ConocoPhillips to cancel plan to sell interest in the block.
“PIM, which is facing and had recently been allowed to export their products at higher price, would be willing to buy Block A gas at higher price. Talks among the industry are that PIM has indicated willingness to buy at around US$3.5 per MMBTU, but Block A partnership is pressing to get more,” the source said. Production sharing contractors usually sell their gas for domestic use lower than $3 per MMBTU. The source also said that the block is having high potential exploration upside, which is confirmed by Indonesian upstream watchdog BPMIGAS. “ConocoPhillips has reported prospects in the block that have potential to yield 3-4 TCF of gas,” BPMIGAS deputy chairman Zanial Achmad told Petromindo.Com Thursday.
The source, however, said that ExxonMobil is unlikely to cancel plan to sell stake in the block despite improving security condition. “ExxonMobil don’t play with small fish like Block A. They will surely want to focus attention on Cepu block. It’s apparent from their strategy to sell their 50 percent interest in madura BD block in East Java, which has gas reserves about the same size of Block A to Husky Energy,’ the source said. (godang)