Medco seeks 49 percent production split in Aceh

Ika Krismantari, The Jakarta Post, Jakarta

Upstream oil and gas regulator BPMigas is reviewing a production split for Aceh's Block A oil and gas fields, a senior official says.

A split for the block was only recently determined, giving the government 65 percent of production and the operator the remaining 35 percent.

However, BPMigas deputy chairman Abdul Muin said Wednesday the operator, Medco EP Malaka, had requested a review of the split asking for a higher share, saying the cost of project was expected to rise as a result of soaring energy prices globally.

"The split of 65:35 was determined in favor of the government in December last year, but referring to the project's economic scale, Medco proposed that we change the split to 51 percent and 49 percent," Muin said during a hearing with House of Representatives Commission VII on energy and mineral resources.

"We are still waiting for the government's response to the proposed change in the production split at the three fields -- Alur Siwah, Alur Rambong and Julu Rayeu -- in the block," Muin said, referring to the Energy and Mineral Resources Ministry.

Medco president director Lukman Mahfoedz declined to comment.

Muin said he was optimistic the block would be able to meet its target of starting commercial operations by 2010.

Medco is expected to supply 110 million cubic feet of gas to the Pupuk Iskandar Muda (PIM) fertilizer plant in Nanggroe Aceh Darussalam and 15 million cubic feet to other local industries, from the block's production.

Muin also commented on the Tangguh liquefied natural gas (LNG) plant, whose construction is now 85 percent completed. He said the project's first processing unit (train) was expected to be onstream in October this year, and the second unit in March 2009.

BPMigas deputy for operation Dody Hidayat said Wednesday the body had ordered Japan's largest oil and gas firm, Inpex Holding Inc., the operator of the Masella block in the Timor Sea, to use a floating LNG plant in the area rather than building a gas pipeline from the location

Dody said the company, which operates the block located more than 2,000 meters beneath the sea and is expected to produce around 4 million tons of gas per annum, could lease the facility.

He also urged Inpex to submit its development plan for the project before May, otherwise it would risk its permit being revoked.

Last year, Inpex set aside US$88 million for the drilling of four appraisal wells in the block.