Interview: Energi Mega Persada sets to become E. Java?s top gas producer
Wednesday, September 15 2004 - 12:51 AM WIB
EMP director Tom Soulsby, told Petromindo.Com, in a recent interview that subject to satisfactory PSC contract extention, EMP planned to bring on stream the Terang-Sirasun gas field within the Kangean PSC, which has proven gas reserves of over 1.2 trillion cubic feet (TCF), into production by 2008.
?EMP will spend around US$ 400 million to bring the field in-to production at a rate of about 300 MMCFD of natural gas to the gas short East Java market,? he said.
EMP is seeking approval from its minority shareholders on September 30 to acquire Energi Mega Pratama Inc. from Oceanpro Resources Limited. (Kangean) Ltd. EMP Inc. is a vehicle company set up by EMP shareholders to acquire Kangean block from its previous operator BP Plc.
Kangean block is currently producing some 110 MMCFD of natural gas from its maturing Pagerungan field, supplying gas to PLN, PGN and Petrokimia Gresik. Soulsby said EMP is contemplating additional investment into the Pagerungan field to increase its production rate and to extend the field?s life.
The Kangean block?s development, however, is still subject to government?s approval to extend the contract, as the block?s contract would expire in 2010. The previous operator has been asking for a 20-year extension of the PSC.
According to the company?s prospectus, as per June 2004, the remaining 3P reserves in Kangean block are 2.8 TCF. The company would buy Kangean block for US$ 165 million.
EMP is also operating and owns a 50 percent working interest in the Brantas PSC block in East Java through its subsidiary Lapindo Brantas. The block is expected to average the production some 70 MMCFD this year peaking at about 83 MMCFD by years end. The Brantas PSC has 187 BCF of 3P reserves.
Soulsby was optimistic that Kangean?s future gas production could be absorbed by East Java market. ?Demand is huge in East Java. I?m optimistic that all potential supply sources in East Java, including Kodeco, Santos and EMP can sell their gas to customers in the East Java market,? he said.
If the acquisition were approved, EMP would immediately be East Java?s top gas producer, selling some 200 MMCFD from Pagerungan and Brantas. Kodeco is the other major supplier currently supplying about 75 MMCFD to PLN at Gresik.
Beside the two blocks, EMP is also operator of Malacca Strait PSC in Central Sumatra with a 60.49 percent working interest. The block is producing some 11,000 barrels of oil per day. He said EMP has been successful in reducing the natural production decline rate of the Malacca Strait block.
Growth Strategy
Soulsby said EMP?s growth strategy is focused on optimizing value of its current assets and by acquiring new blocks where there is a strategic fit with a current specific focus on the domestic gas market. ?EMP?s growth strategy is very focused on the domestic gas market,?he said. ?We are looking for ?look-a-like? Brantas block style developments. Kangean fits perfectly into this strategy. Kangean also gives us a strong market position in East Java.?
?In relation to our incremental growth strategy, we have been successful in discovering gas in Brantas block with an exploration success ratio in excess of 90 percent. More over, we can rapidly monetize new gas. In the Malacca Strait PSC we have successfully completed development wells which has led to an additional production rate of 1,600 BOPD, bringing total production of 11,000 BOPD in the second half of this year,? he said.
He further said EMP was currently reviewing several other E&P projects. ?EMP is continuing to evaluate the possibility to acquire more E&P assets. But in each acquisition EMP will focus on value, strategic fit and EMP prefers to operate what it acquires,? he said.
He said EMP?s strategy to focus on gas producing assets for its growth was based on the fact that Indonesia?s domestic gas market is still underdeveloped and that gas assets are generally priced cheaper than oil assets in the current oil price environment.
EMP estimates that comparative oil transactions are priced above US$3.00 per barrel of 1P oil reserve in Indonesia now (if and when available), compared to $ 0.60 per barrels of oil equivalent - for 1P gas reserves when it acquired Kangean. (alex)