ENERGY NEWS

IMI: INDONESIAN OIL UPDATE FOR JUNE: FOCUS ON PERTAMINA SUMMARY: 

Pertamina plans to triple crude oil production from its own fields by 2004 to some 150,000 barrels per day. In order to do so, it will spend Rp 9 trillion (US $818 million at Rp 1100/$) on exploration and production over the 2001-2005 period. Pertamina is also considering purchasing YPF Maxus assets in Indonesia and shares in ExxonMobil’s Cepu block. Pertamina is pursuing other crude processing deals after expiration of a 90,000 barrels per day deal with Shell Singapore. The state-owned oil and gas company may also renegotiate LNG sales contracts; opened an office in Singapore; and signed more production contracts which could generate an additional $5.5 million in investment over the next ten years. End summary. 

Pertamina’s Upstream Expansion

Pertamina officials have outlined the state-owned oil and gas company’s plans to expand upstream production during various press interviews. On December 8, director for exploration and production Gatot K. Wiroyudo said Pertamina would increase its exploration and production spending from 2000’s Rp 1 trillion (US $91 million) to Rp 1.8 trillion (US $164 million) in 2001. The increase in spending is part of an ambitious plan to spend a total of some Rp 9 trillion (US $818 million) over a five-year period to boost Pertamina’s output from 210,000 barrels of oil equivalent per day (BOE/D) to 425,000 BOE/D by 2005. In a February interview, Pertamina President Baihaki Hakim expressed the target slightly differently in terms of tripling Pertamina’s current crude oil production of 46,000 barrels per day (B/D) (note: making Pertamina Indonesia’s ninth largest producer from its own fields) to 150,000 B/D by 2004. Pertamina has made some modest discoveries recently to bring it closer to this goal.

Pertamina reported that exploration well TBB-1 (Tambun B-1) discovered oil at a depth of 2,300 meters in Bekasi, West Java on January 1. The well flowed crude at the rate of 2,639 barrels per day (b/d) and gas at 8.59 million standard cubic feet per day (MMSCFD). The well was capped on February 15 while Pertamina carries out an evaluation of the hydrocarbon reserve in the Tambun B structure. The well is the fourth productive discovery in Pertamina’s Java exploration area. The KTB-1 well in East Java flowed 7.2 b/d and 8.4 MMSCFD on July 15, the MLD-1 well in West Java flowed 1,764 b/d and 13.7 MMSCFD on July 28, and the SC-1 well in Gresik, East Java, flowed 8.59 MMSCFD on December 6.

Pertamina also reported that its West Ketaling No. 4 well, which started drilling on March 7 in Sumatra’s Jambi province, tested oil at the rate of 4,027 B/D. Pertamina said the relatively large oil find makes new oil field development possible in West Ketaling. 

Pertamina Seeks Upstream Acquisitions

In order to expand oil and gas production, Pertamina is also seeking to expand ownership and participation in production blocks and is eyeing both Repsol YPF assets in Indonesia and ExxonMobil’s Cepu oil block

. -- Petrominer magazine reported in its March issue that Pertamina’s Board of Government Commissioners had given Pertamina the green light to pursue acquisition of Repsol YPF’s seven blocks. Pertamina’s hurdle, however, is that Repsol YPF wishes to sell its assets as one package, bundling the two productive blocks –- the Southeast Sumatra and Offshore Northwest Java blocks –- with its less productive ones for a reported price tag of US $800 million. Pertamina has been encouraged to form joint ventures to purchase Repsol YPF’s assets. Other reported bidders are local firm Medco Energy Corporation, the Thai Petroleum Authority, Mitsui, and Korea National Oil Corporation.

-- Pertamina is also seeking a 20-percent equity share in ExxonMobil's Cepu oil block in Central and East Java and has offered US $400 million for the purchase. ExxonMobil forecasts spending $2 billion on developing the Cepu block. ExxonMobil, which estimates the block has over 250 million barrels of recoverable reserves, hopes to produce up to 100,000 B/D of crude, starting at around 25,000 B/D in 2003. (Note: The terms of Cepu’s Technical Assistance Contract would normally allow Pertamina to hold a ten-percent stake. Pertamina is negotiating for a greater share of the equity after ExxonMobil discovered additional crude oil reserves in the block formerly operated by Humpuss Patragas, a company owned by Soeharto’s son Tommy.)

Pertamina Pursues Crude Processing Deals 

Pertamina and Shell Singapore stopped negotiations in March on the extension of a 90,000 b/d processing deal since both sides were unhappy with the processing arrangement. Pertamina regularly missed lifting schedules and was reluctant to pay penalties imposed under the contract. Shell was looking to raise its refining fee from US $1.20/bl to US $1.50/bl under the three-month extension. Pertamina processed 60,000 B/D at Shell Singapore's refinery in January to March of this year.

Indonesia has begun to search for other refining deals and suppliers for the domestic market. In May, Pertamina officials said the company had turned to Thailand for crude processing, but was also looking for additional capacity. Pertamina asked PTT (the Petroleum Authority of Thailand) to process 200,000 B/D, or PTT’s maximum capacity, but a deal has not yet been struck. Pertamina may also return to Shell Singapore or strike another crude processing deal with BP’s Singapore Refining Company.

Pertamina May Renegotiate LNG Sales Contracts

According to Pertamina’s Baihaki, the company is willing to renegotiate LNG contract terms with its Japanese buyers, Osaka Gas and Kansai Electric, who are seeking a discount on LNG prices amounting to a combined US $100 million and shorter contract periods than the current 20 years. The buyers object to recent increases in the price of Indonesian LNG, which is pegged to a basket of Indonesian crude oils. Pertamina will have to consult with the DPR and the Finance Minister since the proposal would substantially affect Indonesia's revenues.

Pertamina Energy Trading Opens in Singapore

Pertamina Energy Trading Ltd (Petral), a subsidiary of Hong Kong-based Pertamina Energy Trading (ex-Perta Oil), has set up shop in Singapore. Hong Kong-based Pertamina Energy Trading is a wholly owned subsidiary of Pertamina. Petral will market Indonesian crude oil and oil products as well as import crude oil and oil products to Indonesia. Petral will also offer logistical services to Pertamina and represent its interests in Singapore. Pertamina’s former office in Singapore was closed following the regional financial crisis of 1998. The new office joins other Pertamina-affiliated marketing offices based in Tokyo and Seoul.

Pertamina Signs More Contracts

Pertamina signed two Production Sharing Contracts (PSC’s) and a Technical Assistance Contract (TAC) on May 17. Pertamina awarded a PSC to Chevron Kisaran and Texaco Kisaran, units of Chevron Corp. and Texaco Inc. respectively, to develop the Kisaran block in North Sumatra. The second PSC went to Coparex (Banyumas) BV for exploration of the Banyumas block in Central Java. Pertamina also signed a TAC with local company Buana Sadpetra Sebasa Ltd. to develop the Mambang Sebasa field in South Sumatra further. The two PSC’s and the TAC will generate total investment of US $5.5 million for exploration during the first ten years.

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