Interview - Gulf Indonesia to Invest US$ 300 million billion to boost gas supply

Oil and gas company Gulf Indonesia Resources Limited(NYSE:GRL) a unit of Gulf Canada Resources ltd and its partners, would invest US$ 300 million for the next three years to boosts its gas operation in South Sumatera to add gas supply to American oil and gas company PT Caltex Pacific Indonesia in Riau and send new gas supply to Gas Supply Private Ltd. In Singapore, the company said.

Company vice president for administration Supramu Santosa said GRL would develop both the Sumpal and Suban field of the Corridor Block in South Sumatera for the planned gas sale contract with both companies, as well as gas discoveries in the South Jambi "B" block.

"Thus, we will invest about US$ 100 million annually in the next three years, mainly for drilling and the construction of gas facilities, " Supramu told Petromindo.com in recent interview.:

Supramu said Gulf Indonesia was looking to add gas supply to Caltex by 120 MMCFD from 300 MMCFD at present.

"The negotiation (between Gulf Indonesia and Caltex) has been completed," Supramu said.

Gulf Indonesia will send natural gas from its Grissik gas plant in South Sumatera to Caltex's Duri oilfield in Riau through a 540 kilometer-long pipeline owned by state gas distribution company PT PGN. Caltex will use the gas for the burning purpose at its oil production activities and for the recently completed cogeneration facility.

According to Supramu PGN needs only to add compression to the existing pipeline to transmit the additional gas supplies from Gulf to Caltex.

Gulf expects to start delivering the additional gas sometime in 2002, Supramu said.

"This Caltex II deal will be effective for 20 years and would generate total revenue of approximately US$2,5 billion. The government will receive approve US$1,5 billion," Supramu said.

Gulf Indonesia will also send its Sumatera gas to Singapore under the gas sale contract to be signed by state oil and gas company Pertamina and Gas Supply Private ltd, which is a subsidiary of Singapore Power.

Pertamina initialed the preliminary agreement with the Singaporean company in early September and the final agreement was expected to be signed by mid-November this year. According to Supramu, initially Gulf Indonesia would account 55% of the total gas supply to Singapore, while the remaining 45% will be delivered from the gas fields operated by Santa Fe Energy Resources. The gas supply will start at 150 MMCFD in 2003 and will be increased to a peak rate of 350 MMCFD by 2009 for a total contract period of 20 years.

The gas will be transported through the pipeline to be built by PGN from South Sumatera to the Singapore border.

The Sumatran gas will be the second major gas agreement signed by Pertamina and Singaporean entities. Pertamina has also signed a gas sale deal with Singapore's Sembawang Gas to supply pipeline gas from the West Natuna area of the South China Sea.

Gulf Indonesia is the member of West Natuna Gas Consortium that will supply gas to Sembawang for 22 years starting from late in 2000. Other consortium members are Conoco of the US and Premier Oil of Britain.

Gulf Indonesia could not participate in the impending gas sale contract to be signed by Pertamina gas sale to Malaysia and Malaysian State oil company Petronas due to the lack of its gas resources in West Natuna.

Conoco has said it would become the exclusive gas supplier to Malaysia under the contract to be signed by Pertamina and Petronas.

Supramu however noted that GIR believes that Malaysia would still need more gas and the company expected to supply gas to Malaysia through Singapore in the future.

"We think gas reserves in South Sumatera, maybe much higher than the amount of gas supply to Caltex and Singapore Power, " Supramu said.

Aside from the Corridor and South Jambi "B" Blocks in South Sumatera and Kakap Block in West Natuna, Gulf Indonesia also operates among others the Ketapang Block in East Java and the Sebuku Block off the offshore South Kalimantan in the Makassar Strait. It also has a 50% stake in Block A in Aceh in 50-50 partnership with Exxon-Mobil.

Supramu said Gulf Indonesia and Exxon-Mobil are now eyeing a deal to supply gas from Block A to fertilizer company PT Pupuk Iskandar Muda in Lhokseumawe, North Aceh.

"We are now in negotiation stage. Hopefully, security conditions in Aceh improve and PIM can continue its delayed expansion program and Block A can be developed," Supramu said.

According to Supramu, GIR currently produces a total of 85,000 boepd, including 39,000 barrels of oil per day. The oil output comes from Kakap (14,400 bpd), Ramba area in South Sumatera (13,500bpd), Grissik area (6,600 bpd), Jambi (4,200 bpd) and Aceh (300bpd). (alex)