Rift Basin arranges joint development of East Java oil field

By Alexander Ginting

Vancouver-based firm Rift Basin Resources Corp. announced on Tuesday it has entered into a letter of intent with a Lebanese financing group to share the economic obligations and benefits of its pending interest in the Indonesian onshore multi-reservoir oil field known as the Dandangilo & Beji Block in East Java.

Under the terms of the LOI, the Lebanese firm will advance initial operating capital of up to US$700,000 to fully fund technical assessment, equipment acquisition, mobilization, service and enhancement work and administrative support as required for the first five wells on the field, in compliance with the company's obligations under the MOU. Operations will be conducted through a jointly-owned (50:50) operating company (PT Rift).

Upon commencement of commercial oil production, the funder will be entitled to priority recovery of its initial operating capital advanced, on a 70:30 basis of PT Rift company profit, until full recovery. Upon achieving full recovery, Rift Basin will be entitled to 70 percent of PT Rift company profit until it has in turn recovered US$700,000 in full recognition of its own past costs and the introduction of the opportunity to the funder. Subsequent to the complete satisfaction of these recoupment conditions, the parties will proceed to jointly commercialize the field on a 50:50 basis.

The Dandangilo & Beji Block has historic and current oil production. It is located in Bojonegoro, East Java, Indonesia, and contains 110 existing shallow wells within an 80 sqkm area.

According to data on file at the University of Pembangunan Nasional Veteran, Jakarta, original oil in place in the field reservoir was 112 million stock tank barrels. Pertamina recorded production of approximately 20 MMSTB during the period 1963-1980 after which no commercial operations were undertaken.

Rift Basin has earlier signed deal with PT Sinergi Wijaya Kusumah to evaluate and redevelop the Dandangilo & Beji Block. PT Sinergi has the rights under a renewable 5-year Cooperation Agreement with KUD Sumber Pangan to produce oil from existing shut-in oil wells in the working area. Rift will apply Enhanced Oil Recovery techniques to the existing wells in order to bring them back into production.

KUD is a district-level cooperative with the rights, under a petroleum production contract with Indonesian state oil company PT Pertamina, to lift and raise oil from relinquished and mature fields and deliver to a point agreed to between the parties, as approved by the Ministry of Natural Resources. The Field is currently producing approximately 1,500 barrels per day (bpd) from 6 wells through KUD without the benefit of modern EOR technology, the company said.

Editing by Reiner Simanjuntak