Medco to speed up Blok A gas production to tap high gas prices

Ika Krismantari, The Jakarta Post , Jakarta | Fri, 08/08/2008 10:35 AM | Business | PT Medco Energi International, the country's second largest gas producer, plans to speed up by one year the development of the Blok A gas project in Nangroe Aceh Darussalam.

Lukman Mahfoedz, president director of Medco's unit handling the oil and gas sector -- Medco E&P, said Thursday that the company now planned the US$600 million project to start producing in 2009 one year ahead of the original 2010 target. He was speaking after Medco's extraordinary shareholders' meeting, Thursday, saying that the faster timetable was to take advantage of the high gas price, which averaged $4.6 per million British thermal unit (mmbtu) in the first half of this year. At the initial production stage, the block could produce 15 million cubic feet per day which would probably be delivered to the nearest PLN power plant in Sumatra. By 2010, the block's production would be enough to additionally supply gas to the Pupuk Iskandar Muda (PIM) fertilizer plant in Aceh, at 110 million cubic feet of gas per day, Lukman said.

"This project is one of seven projects aimed at supporting the company's performance, after the sale of Apexindo (Medco's drilling services unit)." The other six projects include the development of the Senoro project in Central Sulawesi, development of the gas block in Lematang, South Sumatra, construction of a bioethanol plant in Lampung and exploration for oil and gas in Libya. The total cost for all seven projects is estimated to reach up to $2 billion. Medco earned $62 million in net profit in the first six months of this year, a 146 percent rise from a year earlier. Medco's chief financial officer D. Cyril Noerhadi said that additional production from two blocks in Bawean, in East Java and Langsa, in Aceh, was the biggest contributor to the rise in profits.

The two blocks will not contribute to the company for long as they are among the seven blocks the company is planning to sell. "We have decided to sell the seven blocks, as we want to focus on blocks where Medco is the operator," Lukman said. In Thursday's meeting, the shareholders approved the company's plan to sell its stake in Apexindo Pratama Duta to PT Mitra Rajasa for $341 million. Mitra will pay $272.7 million in cash and $68.2 million in bonds. During the meeting, Medco also announced plans for its oil and gas project in Libya. It plans the project to be on stream by 2010, with an initial rate of production of 50,000 barrels of oil per day.