Gulf Indonesia's oil-gas output may double in 3-5 year

Gulf Indonesia Resources Ltd. (GRL) could double its Indonesia oil and natural gas production within three to five years with any success in exploration projects underway, according to W.T. Fanagan, president and chief executive of Gulf Indonesia.

Gulf Indonesia invests about US$150 million a year on exploration and development, said Fanagan, "plus or minus a little bit depending on the year."

"We see that as we go forward, certainly in this price environment, that's very doable for us," he said.

Gulf Indonesia's current production is 48,000 barrels of oil equivalent a day, of which 60% is gas, according to Fanagan. The gas is sold through a PT PGN pipeline to Caltex Corp. (P.CXX), said Fanagan.

Next week, Gulf Indonesia will start drilling its first well in the Sakala Timur block offshore East Java, he said, the beginning of a 12-well program that will spread over 18-months.

Fanagan said the area held "enormous prospects, which will give huge uplift to our shareholders...if we're successful."

The cost of the first well is US$6 million to $7 million, Fanagan said, and "over the next three years on exploration alone we'll spend about $20 million to $25 million a year."

"Over the next few years, the potential for doubling (of production) is very realistic. With any kind of exploration success, doubling production is certainly a goal we'd like to see," said Fanagan.

Gulf Indonesia could double the production "within three to five years, a little bit less maybe," he said.

Gulf Resources Has 2 Gas Supply Contracts Under Negotiation

Gulf Resources currently has two gas supply contracts under negotiation, Fanagan said, one with Singapore Power and one with Caltex for additional supplies.

Pipeline for the West Natuna gas project - for which Caltex is the buyer - is under construction, said Fanagan, and "most of the pipe is laid and now it's just a matter of getting the facilities on stream."

"That's due to come on steam late this year, first quarter next year," he said.

Gulf Resources only has a "little piece" of the West Natuna project, he said.

In the Sumatra gas project, of which Gulf Indonesia holds 55%-60%, gas from Sumatra is to be sold through pipeline to Singapore Power.

The gas will start to flow sometime in 2002, he said.

Gulf Indonesia is listed on the New York Stock Exchange. Gulf Canada Resources Ltd. (GOU) is the principal shareholder with 72%.

Gulf Indonesia holds approximately 11 million acres in production contract areas concentrated in Sumatra, the Natuna Sea and offshore East Java. (*)