Medco eyeing to take over ExxonMobil?s Natuna huge gas block

JSX-listed oil and gas company PT.Medco Energi Internasional Tbk. said it was interested to take over giant Natuna D-Alpha gas block from US oil giant ExxonMobil Corp. should the government decide to terminate the latter?s contract to operate the block by the end of this year.

Medco President Hilmi Panigoro told reporters on Thursday that thus far, ExxonMobil has done nothing to develop the block?s huge gas reserves.

Hilmi said Medco has informally stated its intention to Vice President Jusuf Kallla, Indonesia?s de-facto economic czar. ?The reserves just lying there idle. If developed, it could contribute US$3 billion per year in state revenue, he said without elaborating detail.

Hilmi estimated that US$5-7 billion investment would be needed to develop the block and development could be conducted in stages. According to Medco advisor and major shareholder Arifin panigoro Natuna D-Alpha contract would expire in 2005.

ExxonMobil, however, said its contract on the block would expire in 2011 and said it has no intention to give up the block?s contract. ?ExxonMobil is already in talks to sell the gas to Malaysia and Thailand. We?re waiting for the commercialization and has submitted the block?s commercialization plan to BPMIGAS,? said ExxonMobil Oil Indonesia senior official Maman Budiman on Friday.

The Natuna D-Alpha gas field, located approximately 850 miles from Java, was discovered in 1973 and has estimated recoverable hydrocarbon resources of 46 trillion cubic feet (TCF) of natural gas. ExxonMobil has a 76 percent share in the Natuna gas field PSC, with PT Pertamina holding the remaining 24 percent.

However, exploitation of the resources is a complex technical challenge and high cost due to the large size of the field and a gas composition of approximately more than 70 percent carbon dioxide.

ExxonMobil and Pertamina had been trying to sell Natuna?s gas to Thailand and Malaysia through pipeline, but thus far, none of the plan materializes. The partnership had also studied possibility to pipe the gas to Java. But high level of carbon dioxide contained in the gas would make production below 1 BCFD uneconomic.

Meanwhile, Director General of Oil and Gas Iin Arifin Takhyan said that until the PSC contract ends in 2011, Medco could only enter the block through business-to-business approach. ?A gas field can only be developed if the market is available,? said iin.

Iin, however, admitted that the government had the right to terminate the contract if the Natuna partnership failed to shift from exploration stage to development stage by next year. (dino/godang)