Medco agrees to grant S. Sumatra 5 percent of annual profit

PT Medco Energi International and South Sumatra provincial administration have signed an agreement allowing the province to get 5 percent of the annual profits gained by the oil firm's subsidiaries in the province, Neraca daily reported Wednesday.

In line with the accord, Medco will this year grant US$1.2 million to Perusahaan Daerah Pertambangan dan Energi Sumsel (PDPDE), the energy and mining firm owned by the South Sumatra administration.

Medco operates Rimau Block in Musi Banyuasin regency, South Sumatra, through its subsidiaries Exspan Airlimau and Exspan Airsenda. According to a report, the block, currently producing around 83,883 barrels of oil equivalent per day (boepd), contains proven reserves of 153 million barrels and probable reserves of 185 million barrels.

The Rimau Block contract has been extended from April 23, 2003 to April 23, 2023.

The grant scheme was designed in response to South Sumatra province's demand for a 10-percent participating interest in the Rimau block. Medco has turned down the demand.

?Actually, the grant amount would reach to around $285,000 per month,? Aditya Mandala, Exspan Nusantara?s corporate secretary, told Petromindo.Com on Wednesday, adding that the amount of the grant will also depend on production volume in the area.

In return for the grant, the provincial administration will improve security at Medco's projects. (*)