Medco sees increasing development costs at Aceh gas block

Medco E&P, a unit of JSX-listed energy firm PT.Medco Energi Internasional Tbk. expects costs to develop gas field in Block A PSC in Aceh to increase due to soaring rig and material costs.

CEO Lukman Mahfoedz told Petromindo.Com in an interview on Sunday that latest cost estimate for the block’s gas field development was now US$600 million, 20 percent higher than the previous estimate of $500 million.

Gas from Block A would be supplied to Aceh fertilizer maker PT.Pupuk Iskandar Muda (PIM) at the arte of 110mmcfd and to state electricity firm PLN at the rate of 15MMCFD. Negotiation on gas pricing are currently ongoing, he said.

The company has submitted plan of development for the field along with proposal to extend the block’s contract by another 20 years to 2031. The block is expected to start gas production by late 2010, said Lukman.

Medco and partners will receive 49 percent production split from the block, higher than the rate of 30 percent normally given to standard PSC contractors.

Lukman also said that block might be able to produce 1,000-2,000 BPD of crude by the end of 2008 by reactivating old oil wells within the block.

The block is operated by Medco with a 41.67 percent interest. Other participants are Japex (16.67 percent) and Premier Oil (41.67 percent).(alex)