Operator First for KrisEnergy in Indonesia
Singapore-listed KrisEnergy has received government approval for the development of the Lengo gas field in the Bulu production sharing contract area offshore East Java. It will be the first time the company has acted as operator in Indonesia.
The Bulu production sharing contract (PSC) covers 697 sq. km in three separate areas, Bulu A, Bulu B and Bulu C, over the East Java Basin in water depths of 50 to 60m. The Lengo gas discovery is located in the Bulu A area and will be developed via four development wells and an unmanned wellhead platform. A 20-inch, 65km export pipeline will transport the gas directly to shore.
Production is anticipated to commence approximately 24 months after the joint venture partners declare final investment decision and is expected to plateau at 70 million cubic feet per day.
“This is our first development as the operator in Indonesia and we have been building up our technical and project management competencies in Jakarta to be ready for this moment,” says Chris Gibson-Robinson, director of exploration and production.
“When on stream, the Lengo field will bring the group’s production mix to approximately 52 percent gas versus 48 percent oil. Demand for gas continues to grow strongly across Indonesia and long-term pipeline prices are holding firm despite volatility in the international oil markets. Bulu is the potential aggregation hub for gas into East Java if we are successful in the appraisal of East Lengo and exploration in Sakti.”
KrisEnergy holds a 42.5 percent operated working interest in the Bulu PSC and is partnered by AWE Limited with 42.5 percent, PT Satria Energindo with 10 percent and PT Satria Wijayakusuma with 5 percent.
The new project reflects CEO Keith Cameron’s optimism despite the impact weaker oil prices are having on exploration globally. He believes the company will be profitable in 2015 and 2016, although it suffered a loss of $33.8m for the nine months ended September.
The company’s production has increased nearly fourfold, increasing revenue by 33 percent by the third quarter 2014. In announcing the company’s results in November, Cameron said: “Despite external pressures on oil prices, we are pleased to have exceeded internal expectations on production to support revenues. We believe the balance in our portfolio of an oil and gas production mix as well as a combination of royalty/tax and production sharing contract fiscal regimes, mitigates to some extent our exposure to commodity price volatility.
“We have made solid progress on our two development projects in the Gulf of Thailand and remain on track for first oil in 2015. We are tremendously excited to be operating Cambodia Block A and we are engaging our partners and the authorities to reach agreement for the Apsara development concept as soon as possible. There has been an associated ramp up in capital expenditure for our various developments and we are well funded from our two bond issuances this year, which have cut our cost of debt in half to just below 5.0 percent. Our debt restructuring is now complete and although the cost of the exercise has impacted our bottom line, we will reap the longer-term benefits through associated lower rates of interest.”
The company’s capital expenditure is expected to reach between US$200 million and US$250 million next year.