SPC, Cue agree to transfer interests in Jeruk to Medco

Singapore Petroleum Company Limited (SPC) and Australian oil and gas firm Cue Energy Resources Ltd have entered into a restructuring agreement with Medco Strait Services Pte Ltd, a subsidiary of PT Medco Energi Internasional Tbk, to transfer stake in the Jeruk field of the Sampang PSC offshore East Java.

In April 2005, both SPC and Cue voiced interests to regain their stakes in the Jeruk field, following the discovery of oil there during the exploration campaign by Ausralian firm Santos Limited (operator) and Medco. Medco paid 50 percent of the exploration costs due to reluctance of SPC and Cue to participate in the exploration. Medco asked SPC and Cue to pay US$145 million and $50 million for the stake in the oil discovered in the Jeruk field.

Under the restructuring agreement, SPC and Cue will transfer approximately 18.2 percent and 6.818182 percent shares, respectively, in the Jeruk field to Medco in exchange for Medco agreeing to reimburse 90.9 percent of SPC and Cue' premium to Santos.

In addition, Medco will pay approximately $16 million and $6 million to both companies, respectively.

Following the agreement, the Jeruk field is now 25 percent owned by Medco, while Santos has 45.0, SPC 21.8 percent, and Cue 8.2 percent. Meanwhile, the ownership structure in the Sampang PSC remains unchanged with Santos having 45.0 percent, SPC 40.0 percent, and Cue 15 percent.

The Jeruk field is located about 42 kilometers east of Surabaya in a water depth of 44 meters. Last year, Santos announced the discovery of oil at the Jeruk-2 well, which flowed at 7,488 barrels per day during tests. Preliminary estimates by Santos put the recoverable reserves at 170 million barrels.

According to Cue, the Jeruk 3 well is expected to begin drilling later in January with an additional Jeruk 4 well is planned for 2006. (Robert)