Lundin farm-out Rangkas Block

Lundin Petroleum AB announced on Thursday that its wholly owned subsidiary Lundin Rangkas BV has entered into a farm-out agreement with Carnarvon Petroleum (Indonesia) Pty Ltd, a subsidiary of Carnarvon Petroleum Ltd (Australia) in respect of the Rangkas block onshore West Java, Indonesia.

According to Lundin, Carnarvon will acquire a 25% interest in the Rangkas block onshore Indonesia. The block covers 3,977 km2 and several leads have been identified in the block. A 2D seismic acquisition program is due to commence in 2010.

Lundin Rangkas BV is the operator of the Rangkas block and will have the remaining 75% working interest. The completion of this transaction is subject to the approval of the Government of Indonesia.

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CBM Asia acquires 48% South Sumatra Energy

CBM Asia Development Corp. announces that it has signed a Letter of Intent with Batavia Energy Inc. to acquire 48 percent of South Sumatra Energy Inc. which, together with PT Medco CBM Sekayu, holds a Production Sharing Contract for coalbed methane on a 58,349 hectare block located in the South Sumatra Basin, Indonesia.

Awarded May 27, 2008, the Sekayu Block PSC marked the first time the Government of Indonesia awarded a PSC for the exploration and development of coalbed methane in Indonesia. PT Medco Energi Internasional Tbk ("Medco"), Indonesia's leading independent oil and gas company, and operator of the Sekayu Block PSC, has forecast that the first commercial coalbed methane production will begin in 2011 and peak in six years. 

Indonesia's estimated coalbed methane resource of 453 trillion cubic feet ("TCF") of gas in place is among the largest in the world after the United States and China. The South Sumatra Basin, the largest coalbed methane basin in Indonesia, is estimated to contain in-place resources of approximately 183 TCF (Society of Petroleum Engineers, 2004).

Under the LOI, the Company will earn a participation interest in Batavia's 31.5 percent working interest in the Sekayu Block PSC, and has committed to exploration and appraisal expenditures over the next three years to determine the commercial feasibility of coalbed methane production.

"We are happy to secure this rare capital acquisition opportunity in Indonesia's rapidly emerging coalbed methane industry. As Indonesia moves to develop its large prospective coalbed methane resources for delivery to domestic and global markets, we look forward to working with our new partners in the Sekayu Block PSC where initial exploration drilling is scheduled to commence by early September 2009. This acquisition will diversify our interests in the coalbed methane sector in Indonesia and complement our already outstanding prospects in the Kutai Basin," said Mr. Alan Charuk, the Company's President and Chief Executive Officer. Successful completion of the Sekayu Block PSC test well will mark the first government approved commercial coalbed methane well drilled in Indonesia.

Closing of the LOI is subject to, among other things, completion of the Company's due diligence review, execution of definitive agreements and applicable third party consents and approvals.

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Niko to spend US$26 million in Indonesia exploration

Niko Resources has spent US$5.6 million in various exploration activities in Indonesia in three months ended June 30, 2009, The company plans to spend around US$26 million in the period of July 2009 to March 2010.

Indonesia is the second largest for Niko after India for the July 2009 - March 2010 exploration spending. The company has arranged for a major international seismic contractor to shoot a 3D spec survey in both the Southeast Ganal and West Sageri blocks, and this program commenced last motnh. 

Additional 2D seismic surveys will also be acquired in these blocks and a contract for these surveys is expected to be signed in September 2009 with acquisition to commence prior to the end of 2009. This 2D vessel will also conduct new seismic surveys in the Bone Bay, South Matindok, Kofiau, and Seram blocks.

In the Kofiau Block, both a 2D and a major 3D seismic program are planned and acquisition of the 3D is expected to commence in the fourth quarter of 2009.

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Salamander claims success in South Sebuku drilling

Salamander Energy Plc announced today that it has completed drilling operations on the South Sebuku-1 exploration well in the Bengara I PSC, East Kalimantan.

Salamander said the South Sebuku-1 well was drilled to a total depth of 1533 meters subsea and encountered multiple gas bearing sandstones in the Tabul and Meliat formations. Drill stem tests were conducted across two of the gas-bearing zones, which flowed at an aggregate rate of 10.9 MMSCFD.

The SS-1 well has been suspended as a potential future producer and the Bengara I partners are in discussion with the authorities with a view to appraisal drilling on the South Sebuku discovery in 2010. 

The discovery is located approximately 15 km from the South Sembakung gas-condensate field in the neighbouring Simenggaris PSC, in which Salamander has a 21.6% interest. The partners are evaluating the potential for tying in South Sebuku to the South. Sembakung gas-condensate field, which received formal development approval last year. 

Heads of agreement for gas sales from South Sembakung were signed on 4 August with PT Pertamina Gas (Pertagas) and PT Medco Gas Indonesia. Under these terms approximately 20 MMscfd will be supplied over an eleven year period at a minimum 

price of $3/Mcf with an inflator indexed to methanol prices. The gas is to be sent to the nearby Bunyu Island Methanol plant, via. a pipeline that will be constructed by he consortium of buyers, and production is expected to commence in late 2011. 

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Lundin Indonesia oil output increased 7%

Lundin Petroleum AB reported higher oil production by 7% in the first half 2009 to 279,000 barrels from 259,500 barrels.

Lundin reported average oil price of US$51.72 per barrel in H1 2009, dropped significantly from US$97.42 per barrel.

Lundin controls 14.5% working interest in Salawati Island block and 25.9% working interest in Salawati Basin block, both in Papua, with net oil production of 2600 barrels of oil equivalent per day in the first half 2009. 

"Following the successful drilling of the South East Wallo-1 exploration well, two further appraisal wells have been completed. The results of the wells will be incorporated into a revised South East Wallo reserve estimate.

Lundin is also the owner of 25.9% working interest in Lematang block, South Sumatra where the development of the Singa gas field is ongoing with first gas production expected this year. A gas sales agreement is in place with PT PLN to supply a gross contract volume of 133 BSCF.

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First gas from Salamander's Kambuna field

Salamander Energy Plc reported the start up of production from its operated Kambuna gas-condensate field in offshore North Sumatra. 

Salamander, owner of 50% interest in the Glagah-Kambuna TAC of Pertamina EP, told investors today that initial production began from the Kambuna-4 well, which was opened up on August 5th, delivering gas and condensate to the onshore receiving facilities at Pangkalan Brandan, North Sumatra. Commercial sales began on August 11th, with gas being introduced to the pipeline system for transportation to the Belawan Power Plant.

After start up, production is targeted to build to an initial plateau of 40 MMSCFD of dry gas and approximately 4,000 barrels of condensate per day. According to Salamander's statement available to Indonesia Today, upon completion of the on-going upgrade and refurbishment of Pertamina's LPG plant at Pangkalan Brandan, up to an additional 10% of gas will be produced so that LPG can be extracted from the gas stream.

"As the productive capacity of the three production wells has been demonstrated to be comfortably in excess of 100 MMSCFD and with capacity in the pipeline and processing infrastructure for additional gas supply, the Kambuna partners, Salamander and Serica Energy Plc, intend to market additional quantities of gas following receipt of regulatory approval to do so," Salamander said.

The Kambuna gas will be predominantly used for power generation to supply electricity to the city of Medan, North Sumatra. The existing gas sales agreements with PLN and PT Pertiwi Nusantara equate to an average price of US$5.9/MCF, escalated at 3% per annum. The blended price for Kambuna condensate will be set at the Katapa Arbei ICP which has historically traded at a slight premium to Brent.

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Oilex farms-out Timor Sea block

Oilex Ltd has entered into an agreement to farm down 15% of its 25% interest in the highly prospective offshore block 06-103 production sharing contract (PSC) in the Joint Petroleum Development Area (JPDA) of the Timor Sea to Japan Energy Corporation.

Oilex told ASX today that the farm-out agreement enables it to achieve one of its key objectives by reducing financial exposure, while at the same time clearing the way for a landmark two-well drilling program to potentially commence later this year subject to rig availability, targeting a combined oil prospective resource of 285 million barrels (100% basis).

After the farm-out, composition of participating interest in the block 06-103 PSC will be Oilex 10%, Global Energy Inc 25%, GSPC Ltd 25%, Bharat PetroResources Ltd 25%, and Japan Energy Corporation 15%.

Interpretation of the Maura 2,140 km2 3D seismic over Block 06-103 was completed in the first half 2009, identifying a portfolio of over 20 prospects and leads. Drilling locations have been selected for the first two commitment wells within the Block on prospects with mean prospective resources of 195 million barrels of oil in Lore and 90 million barrels of oil in Lolotoe.

The farm-down/farm-out agreement is conditional on the Designated Authority approving an extension to Contract Year 3 of the PSC (ending in January 2010), approval for the transfer of 15% interest to Japan Energy, and JV parties giving their consent to the transfer of interest and not exercising their rights of pre-emption under the JOA. 

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AWE to commence Bulu PSC drilling

Australian Worldwide Exploration (AWE) has accomplished interpretation of the Bulu 3D seismic survey in East Java basin and prospects for drilling in the next round of activity are being assessed. 

"At least one well is planned in the Bulu PSC in the upcoming campaign, which is scheduled for Q4 2009," AWE told Australia Stock Exchange on Friday.

Other than Bulu PSC, AWE was awarded a 100% interest in the Terumbu PSC, adjacent to AWE's existing operations in Indonesia, which helps complete the "jigsaw" of vacant prospective acreage in the prolific East Java basin. AWE will operate the Terumbu PSC. 

AWE has also started a 1,200 km 2D seismic survey in the East Muriah PSC, where AWE has 50% participating interest, this month. The survey is designed to provide potential drilling candidates for 2010 and beyond.

Following the award of the Terumbu PSC, AWE has expanded the total acreage holding to approximately 9500 square km in the East Java basin. This basin is a significant oil and gas production region, with approximately 200 million barrels of oil and condensate, and 1.4 TCF of gas being discovered to date.

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Conoco to start North Belut production this quarter

ConocoPhillips expects to commence production of North Belut field in Block B, Natuna Sea this quarter with plateau at 20,000 barrels oil equivalent per day.

Sig Cornelius, SVP of Finance and CFO ConocoPhillips said in an earnings conference call on Wednesday that North Belut should plateau at about 20,000 BOEPD by 2010.

North Belut field is located in Block B of Natuna Sea, around 60 kilometers east-northeast of the Belanak floating production, storage, and offloading vessel installed in the Belanak field.

McDermott International subsidiary J. Ray McDermott S.A completed the construction of a 14,000-ton integrated deck built at its fabrication facility on Batam Island in June. Wortk on the project began in January 2007 and at the peak of construction, more than 1200 people worked on the North Belut Central processing platform (CPP) topsides achieving 5.2 million man-hours.

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Medco profit drops 84%

Oil and gas producer PT Medco Energi Internasional Tbk reported net profit of US$9.58 million in the first half 2009, dropped 84% from the same period last year on substantial decline of sales revenue.

Medco posted net sales revenue of US$311 million, slashed 59% from US$762 million in H1 2008, mainly due to the fall of net oil and gas sales to US$227 million and free fall of net sales of chemicals and other petroleum products to US$15 million (against US$125 million).

Medco's cost of goods sold dropped 55%, while operating expenses also declined 24%. As a result, Medco booked operating profit of US$31.3 million against US$195 million in H1 29008.

Medco has total asset of US$2.07 billion as of June 30th, 2009, while its market cap as of today is US$1.1 billion. With annualized EPS of Rp62, Medco is currently traded with PE multiple 54. Expensive! 

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Rig Tenders join forces with Marco Polo

Marco Polo Marine Ltd has entered into a JV agreement with PT Rig Tenders to penetrate the offshore oil and gas marine segment.

Marco Polo told Singapore Stock Exchange (SGX) this morning that the collaboration mechanism will be formalized between MP Ventures, a subsidiary of Marco Polo Marines Ltd, and Rig Tenders respectively through a 30:70 controlled entity, which will participate in selected offshore oil and gas opportunities, including vessel ownership and chartering services.

Rig Tenders is a 80.54%-owned subsidiary of Scomi Marine Berhad, listed in Malaysia Stock Exchange, engaging in business of owning and operating marine vessels serving the logistic needs of coal and oil/gas segments. Rig Tenders' major customers are Adaro, Arutmin, Chevron, CNOOC, and Total Indonesia.

Marco Polo Marine Ltd is a growing integrated shipping group principally engaged in the ship chartering and shipyard businesses. The group's shipyard which provides ship building, ship repair, and conversion services, is located in Batam Island, Indonesia, occupying a total land area of approximately 348,705 square meters, with a seafront of approximately 650 meters. The group is expanding the shipyard, and when completed, this would be one of the largest shipyards in Batam.

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Seram oil production drops 10%

Lion Energy (LIO) Limited reported oil production of 2,413 barrel per day in Seram (Non Bula) Block PSC for the second quarter 2009.

Lion, owner of 2.5% interest in the block, told ASX that Seram produced 2413 bpd of oil, dropped 10% from 2707 bpd in the previous quarter.

The majority shareholders of the block are CITIC Seram Energy Limited (51%), KUFPEC Indonesia Ltd (30%), and Gulf petroleum Investment (16.5%). CITIC is the operator of the joint venture.

The block contains the Oseil oilfield which has since initial field start-up in December 2002, produced cumulative crude oil of 8.2 million barrels as at June 30th, 2009.

The lowest production was in May 2009 with average of 2338 bpd, but then picked up to 2480 bpd last month. Out of total 219,625 barrels produced in Q2, HSFO was about 200,000 bpd, while the balance was naphtha.

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Conoco Indonesia oil production declined 38%

ConocoPhillips reported lower oil production from its Indonesian operation in the second quarter 2009 by 38%, but natural gas production inched up slightly by 0.5%.

Oil production declined from 26,000 bpd in Q1 to 16,000 bpd in Q2, so for the first half, the average production was 21,000 bpd. Compared to the average production in 2008, actually the first half 2009 is substantially higher by 40%. Meanwhile gas production in Q2 was 451 MSCFD, increased slightly from 449 MMSCFD in Q1. 

As for prices, crude oil price increased 30% to US$56 per barrel in Q2, while natural gas gained 24% to US$5.91 per MSCF.

ConocoPhillips has seven production sharing contracts (PSCs) comprising about 12.3 million gross acres. Four PSCs are offshore (South Natuna Sea Block B PSC, Ketapang PSC, Amborip VI PSC, and Kuma PSC). The remaining three PSCs are onshore: Corridor Block PSC and South Jambi "B" PSC in South Sumatra and Warim PSC in Papua.

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Mitra Rajasa in red still

PT Mitra Rajasa (MIRA) Tbk, parent company of drilling service company PT Apexindo Pratama Duta (APEX) Tbk, reported net loss of Rp115.85 billion in the first half 2009 due to huge financial expenses.

MIRA reported net sales revenue of Rp873 billion and operating profit of Rp306 billion in H1 09. But the company's financial charges reached Rp373 billion. As a result, the company booked loss before tax of Rp67.7 billion.

The biggest financial expenses are bank interest and penalties (Rp232 billion) and bonds (Rp86 billion). The company was lucky to book Rp67 billion gain on derivative transaction. Otherwise, MIRA's net loss would be bigger.

The company's current ratio also worsened. It has current liabilities of Rp2.85 trillion, while current asset at Rp2.02 trillion. The company has total liabilities of Rp12.08 trillion, while its equity was only Rp1 trillion as of June 30, 2009. 

At Rp540 per share, MIRA currently has market capitalization of US$210 million. The stock surged almost 100% in the period of March-May, but then retreated to Rp540 today.

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Santos oil production drops 46%

Santos, Australia, reported 46% drop of crude oil production in its Indonesian operation for the first half 2009. 

Santos reported to Australia Stock Exchange (ASX) last week that Indonesian oil output reached 303,900 barrels in H1 2008, dropped 46% from 566,100 barrels in the same period last year. Santos reported significant drop in second quarter 2009 to 127,100 barrels against 268,900 barrels in Q2 2008.

Crude oil production in Q2 was 28% lower when compared to Q1 2009 due to natural field decline and the sale of Kakap PSC. 

But sales gas production of 7.1 PJ in Q2 2009 was 16% higher than Q2 2008 due to higher Maleo gas offtakes. 

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CUE: Oyong gas production will be on target

Cue Energy Ltd, owner of 15% participating interest in Sampang PSC operated by Santos, was optimistic that first gas production from Oyong field will be on target this quarter.

Cue Energy told Australia Stock Exchange (ASX) this morning that construction of the Oyong Gas phase development has progressed as scheduled ahead of anticipated first gas in late third quarter 2009.

Meanwhile, no oil production revenue was received by CUE from Oyong field during the second quarter 2009 due to timing of oil cargoes. The average production rate for the field for Q2 was approximately 3500 barrels of oil per day. Production was shut in for five days while modifications were made to the production barge for phase two gas production. 

Regarding the Wortel Field, CUE said a plan of development for the field was submitted to Upstream Oil and Gas Regulatory Body (BPMigas) for approval.

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Govt expects lower cost recovery for oil and gas

The Government of Indonesia was optimistic in cutting down the cost recovery by US$1 billion this year to US$10 billion. Government also raised the crude oil price benchmark for 2009 State Budget to US$61 per barrel.

Antara News quoted Anggito Abimanyu, head of Fiscal Policy Agency at Ministry of Finance, saying there is a window of opportunity to cut the cost recovery. Unfortunately he didn't explain the details of where government could cut the costs to be reimbursed to oil and gas contractors.

In a related development, government and the House of Representatives (DPR) agreed to revise up the benchmark price for crude oil to US$61 per barrel from US$45 per barrel as the crude has been hovering above US$68 per barrel in the international market. Government expects oil production would reach 960,000 bpd this year. 

In a bid to cut down the cost recovery and to prevent disputes with contractors, government will issue regulation on cost recovery scheme where details of costs that could be reimbursed will be outlined based on comparative data from other countries.

Oil and gas contributed to almost 30% of the State budget. Controlling the cost recovery will clearly boost significantly the State's income from the sector. Actually, energy and mineral resources minister has issued decree No. 22/2008 about cost of various activities in the oil and gas sector that couldn't be reimbursed by the State.

Indonesia's oil production reached 956,000 bpd in the January-April 2009. 

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Husky spent US$2 million in Indonesia

Husky Energy, Canada, has spent US$2 million for oil and gas exploration activities in Indonesia in the first half 2009. 

The amount spent is very small compared to the company's spending of US$230 million in offshore China projects in the same period.

Husky has interests in several oil and gas blocks. The Madura BD field development plan has been approved by the Government of Indonesia and Husky continues to await approval of an extension to the production sharing contract. "Engineering work has been tendered and will commence upon receipt of the PSC extension," Husky management told investors on Wednesday. 

In the East Bawean II PSC, in which Husky holds a 100% interest, the Transocean Adriatic XI jack-up rig will drill two exploration wells, the first of which was spud on July 8, 2009. 

During the second quarter of 2009, existing 2-D seismic was interpreted for Husky's 100% interest in the North Sumbawa II block, comprising 5,000 square KM in the East Java Sea. Planning is now underway to acquire 800 KM of new 2-D seismic by early next year.

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Marriott-Ritz bombings & The Bombers

Police expects to disclose the identity of two suicide bombers that killed nine people at JW Marriott and Ritz-Carlton hotels, Mega Kuningan, Jakarta on Friday by this afternoon. One of them identified as Nurdin A who stayed at Marriott for about one week.

Nurdin, according to police, stayed at Rom 1808 and he is believed to have assemble the bombs in that hotel. Police found it difficult to identify the other bomber.

Hermawan Sulistyo, member of Bali Bomb investigation team, said the bombers might be members of Noordin M. Top's terrorism network based on explosive materials used. "The explosive materials are the same with those in Bali Bomb. Police also said the materials are the same with those found in Cilacap, Central Java. SO, the pattern is similar," Sulistyo told Inilah.com this morning.

Still, he noted several differences. First, it is unusual to attack the same target, even though for a longer period of time (between the attacks). Second, the measures used this time could categorized "luxury" if the bomber really stayed in the hotel for a long period of time. Bombers rarely stayed in the targeted objects. "Staying in Marriott cost you Rp1.5 million (US$150) per night. For a week? It's costly," Sulistyo said.

Sidney Jones, director for International Crisis Group (ICG) suspected the bombers are member of Noordin M. Top group. "If police was right about suicide bombing, this is pointed to old groups surrounding Noordin M. Top. But this is just a speculation," Jones said.

Noordin is considered a mastermind of Bali bombing which killed at least 202 people, mostly foreign visitors, in October 2002. Other related group mentioned is Jamaag Islamiyah.

Jamaah Islamiyah is also accused of carrying out a 2003 attack on JW Marriott in 2003, a 2004 attack on the Australian Embassy in Jakarta, and 2005 triple suicide bombings at restaurants in Bali.

Others speculate on the relationship between series of shootings in Freeport Indonesia's mine in Papua and the Friday bombings mainly because of two Freeport executives (Adrianto Magribi and David Potter) were among the victims.

But political observer Syamsudin Harris dismissed the connection arguing. Haris blamed police and government who were too busy dealing with Corruption Eradication Commission (KPK) issue.

Police also found an active bomb at Room 1808. The guy at Room 1808 reportedly ordered coffee before the explosion. Police investigates the connection between ICP Breakfast Roundtable attended by executives of mining and energy companies at Marriott and the bomber's motives.

Police has yet to confirm whether the bomber at Ritz-Carlton also stayed in the hotel or just a "guest". Police is investigating the man caught by Ritz' CCTV entering the hotel's restaurant before the blast.  

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Marriott-Ritz bombings & energy meeting

Energy and Mineral Resources Minister Purnomo Yusgiantoro dismissed speculation that the bomb attacks at JW Marriott and Ritz-Carlton are related to a meeting of energy and mining executives scheduled this morning at Marriott.

"Is it a coincidence?" one of our readers asked about several executives of energy and mining companies injured and killed in the attacks.

Detik.com reported that these executives have a monthly breakfast meeting titled ICP Breakfast Roundtable scheduled this morning at Marriott. Participants were reportedly:

(1) Edward Thiessen: Country Manager of Alstom Power, being treated at Pertamina hospital.

(2) Pedro Sole: Senior Vice President Alstom Power

(3) David Potter: Vice President Exploration Freeport Indonesia, treated at Medistra Hospital.

(4) Andrew (Andy) Cobham: Hill & Associate, country manager of PT Hill Konsultan Indonesia, being treated at MMC Hospital.

(5) Timothy Mackay: CEO of Holcim Indonesia, died at Medistra Hospital.

(6) Kevin S. Moore: General Manager of Husky Energy, being treated at MMC Hospital.

(7) Mariko Asmara Yoshihara: JAC Indonesia, being treated at MMC Hospital.

(8) Noke Kiroyan: Kiroyan-Kuhon Partners, injured, but has been released from MMC Hospital.

(9) Roy Widosuwito: President Perfetti Van Melle Indonesia

(10) Nathan Verity: Verity HR

(11) James Castle: Castle Asia, currently hospitalized at MMC Hospital.

(12) Max Boon: Castle Asia, being treated at MMC Hospital.

(13) Gary Ford: General Manager Anadarko Indonesia, evacuated to Singapore hospital.

(14) Peter van Wessel: General Manager Oil Tanking, transfered to Singapore hospital.  

Police suspected the man behind the bombs is Nurdin A, who stayed at Marriott Room No. 1808 for almost one week. Police found an active bomb in his room. Police also suspected two suicide bombers at Ritz-Carlton and one at Marriott.

About 16 victims have been released from MMC Hospital, including Noke Kiroyan. Others are Catur Rindu, Cho Ing Sang, Hui Bosco Keung, Jame Makkeba, Janter Rusmanto, Linda, Meliana, Putra, Regi Salstad (Norway), Rinaldi Damanik, Sarah, Shweta Shukita, William, Yunita Kartikasari, and Scott Merrillees (left MMC to continue medical treatment in SIngapore).

Back to our reader's question: is it a coincidence? Is it by design? For what? Most believe international terrorism network is behind the attacks. Hopefully police could investigate thoroughly. Police said the suicide bombings are identical to Jamaah Islamiyah network. (hs/ya) 

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