Medco, Petronas tie up to explore oil in South Sumatra

Publicly-listed oil company PT Medco Energi Internasional tbk, through its subsidiary PT Expan Sumatra, has signed a joint operating venture agreement with Carigali Overseas Sdn. Bhd., subsidiary of Petronas of Malaysia, to explore oil in three blocks of Pasemah oil field with total investment of US$5 million.

The agreement was signed in Jakarta on Tuesday by John S. Karamoy of Medco and Datuk Muhammad Idris Mansyur of Petronas.

Under the agreement, Carigali would provide $3.2 million of fund to drill three oil wells in three blocks of Pasemah. In return, Carigali would get 50 percent of working interest from Pasemah.

Under Medco's production sharing contract the government, Medco would get 35 percent of income from Pasemah, while the other 65 percent would go to the government. As Medco cooperates with Carigali, 50 percent of this 35 percent income would go to Carigali.

John Karamoy noted that the decision to take Petronas was not taken by Medco's board of directors based on the consideration that Petronas has a well-known high-technology in oil exploration.

"Actually, we give the same opportunity to every body to be our partners. But, our choice goes to Petronas," John said.

John noted that the three blocks in Pasemah had the potency to produce up to 60 million barrels. "Drilling activities will start in July, 2000," he said.

Medco's Pasemah concession covers a frontier area of 8,560 hectares, and would span until year 2023. (*)