EMP resumes oil production at Kangean block, East Java

Ika Krismantari, The Jakarta Post, Jakarta

Indonesian publicly listed oil and gas firm Energi Mega Persada (EMP) has resumed production at the company's Kangean block in East Java after being halted for almost six months due to technical problems at its storage units.

EMP investor relations head Herwin Wahyu Hidayat told The Jakarta Post that one of the fields in the Kangean block, called "Sepanjang", resumed production Monday at a rate of 3,500 barrels of oil per day.

He said a newly leased tanker with a higher storage capacity of 230,000 barrels had replaced the previous storage facility to ensure smooth oil production at the field.

He said the company hoped to gradually increase production to 5,000 barrels of oil per day by December, which would account for almost 25 percent of EMP's total production.

The field itself has the capacity to produce up to 9,000 barrels of oil per day.

The Sepanjang field started production in January this year at a rate of 3,000 barrels of oil per day. However, due to damage to its tanker, production had to be halted in April.

Regarding Kangean gas, Herwin said the company planned to raise the gas price to US$3.30 per million British thermal units (mmbtu) from the current price of about $2.70 per mmbtu, following an increase in the regional price.

"We are currently in talks with several buyers," Herwin said.

Kangean produces approximately 45 million cubic feet of gas per day. About 70 percent of the total production is supplied to state-owned electricity utility PLN and fertilizer producer Petrokimia Gresik. Other buyers include state gas producer PGN and state oil and gas firm Pertamina.

PLN director for power generation Ali Herman Ibrahim confirmed that EMP was proposing an increase in the gas price. However, he said that there had been no outcome from the negotiations as yet.

EMP has a 50 percent interest in the Kangean block, while the other 50 percent is jointly owned by Japan's Mitsubishi Corporation and Japex Petroleum Exploration.

In 2006, EMP produced 3.9 million barrels of oil per day, generating Rp 1.64 trillion ($180 million) in net sales.