Medco invests $460m for gas development in Block A

By Febry Silaban

IDX-listed integrated energy company PT Medco Energi Internasional Tbk through its subsidiary PT Medco E&P Malaka will invest US$460 million for gas field development in Block A PSC, Aceh.

President Director Lukman Mahfoedz told Petromindo.com that the amount is the total investment to be spent by the firm and its partners until the Commercial Operation Date (COD) of the block, including $230 million for the Engineering, Procurement, and Construction (EPC) work to be carried out by a consortium comprising of PT Encona Inti Industri and PT JGC Indonesia.

?The rest will be used to finance the drilling of 10 development wells in the field," Lukman said on Monday during the ceremony to inaugurate the Dr. Zubir Mahmud General Hospital in Aceh Timur regency

Lukman explained the gas reserve of the block was discovered by a company called Asam Merah back in 1972. After changing hands several time, in 2007, the block was acquired by Medco along with partners who finally realized the construction of facilities to produce gas from the block.

"We can now smoothly monetize the gas reserve thanks the existence of the Arun-Belawan pipelines," he said, referring to the gas pipelines owned by PT Pertamina Gas (Pertagas), the subsidiary of state owned oil and gas firm PT Pertamina, which has been in operation since late last year.

Upstream authority SKK Migas said earlier that the first gas from the Block A is expected to come on stream in 2018 at a volume of 63 bbtud, which will be distributed to industries in Aceh and North Sumatra via the Arun-Belawan pipeline.

Last January, Medco signed a Gas Sales and Purchasing Agreement (GSPA) with Pertagas in which the latter agrees to offtake the gas from Block A. Total volume of gas to be supplied under the GSPA is 200 trillion British thermal unit (tbtu) worth US$2 billion with a period of 13 years. The total volume is 198 tbtu with daily supply amounting to 78 bbtu. The price is set at $9.45 per mmbtu at tie-in point of the Arun-Belawan gas pipeline. Arun is located in Aceh, while Belawan is the main port in North Sumatra.

Block A is 41.67 percent controlled by Medco (operator), 41.66 percent by SGX-listed KrisEnergy and 16.6 percent by Japanese firm Japex.

The hospital that was officiated on Monday was developed Medco and its partners as part of their community development program.

"This hospital has been built at a cost of Rp 75 billion, which is borne by Medco together with our partners. The cost is a contribution for the PSC holders, and not part of cost recovery," he said.

Editing by Johannes Simbolon