Indonesia awards blocks, plans new bidding round

May 18, 2009
To boost its declining production, Indonesia has awarded exploration rights for 11 new oil and gas blocks and is already mapping out its next bid round.

To boost its declining production, Indonesia has awarded exploration rights for 11 new oil and gas blocks and is already mapping out its next bid round.

Evita Legowo, director general of oil and gas at the energy ministry, said, “The areas are promising, but we have to wait for the investors to do the exploration so we know the reserves.”

The new awards include: South Block “A,” North Sumatra (PT Renco, PT Prosys); East Pamai, onshore Central Sumatra (PT Nana Yamano); West Belida onshore South Sumatra (Orchard Energi, Bayu); Terumbu onshore and offshore Madura (Australia Worldwide Exploration Ltd.).

The awards also include: Southeast Madura (PT Bama Bumi Santosa, PT Toba); Pasir, onshore East Kalimantan (PT Archipelago); S. Sesulu, offshore East Kalimantan (Hess); Kofiau, offshore West Papua (Biak Petroleum, Niko Resources); offshore West Papua (Marathon, Komodo Energy, Kumawa Energy); Cendrawasih, offshore West Papua (Esso, ExxonMobil, and Biak Petroleum); Northern Papua, onshore and offshore North Papua (Sarmi Papua, Asia Oil).

Legowo announced plans to offer 24 oil and gas blocks in May. Most will be offshore blocks in the less-explored eastern part of Indonesia. Particulars were specified during the Indonesian Petroleum Association annual conventional May 5-7 in Jakarta. Contracts for the 11 blocks awarded were to have been signed at the convention.

Meanwhile, Legowo said the Indonesian government believes it could find more oil and gas reserves based on historical data that Royal Dutch Shell PLC will return to Indonesia. Under a recent memorandum of understanding, Shell agreed to return all its exploration documents from before 1965.

“We expect the data transfer will be completed in no more than 11/2 years,” said Legowo.

She said the government proposed that Stanvac and Caltex, now ExxonMobil Corp. and Chevron Corp., respectively, return their exploration documents from before 1965. Legowo said such historical documentation was expected to provide more information about oil and gas potential in the country.

“It is possible that, based on the data, we will find new oil and gas blocks,” she said.

Although the government has conducted its own seismic surveys, Legowo said the possibility exists that something may have been overlooked.

“Take the example of Cepu block. PT Humpuss had done exploration in the area, but it could not find big oil reserves. But ExxonMobil later on found a big reserve in the block,” she said.

Indonesia is struggling to produce more oil from aging fields. In the first quarter of 2009, production averaged 946,000 b/d, down 14,000 b/d from the government’s target of 960,000 b/d.

Last year Indonesia withdrew from the Organization of Petroleum Exporting Countries due to declining production and increased imports of oil.

Australia

Texalta Petroleum Ltd., Calgary, launched a 240 line-km 2D seismic survey on EP 103 and 104 in the Georgina basin in the Northern Territory of Australia.

Shooting is to end by June 21, and interpretation and processing should take 8 weeks, after which Texalta will shoot more seismic or pick exploratory well locations to be drilled in year three of the permits’ 5-year term.

Indonesia

Niko Resources Ltd., Calgary, noted that it has been awarded eight exploration blocks off Indonesia since October 2008.

Three blocks awarded in May 2009 cover 1.2 million acres each. They are the Kofiau block in West Papua, the Kumawa block in southwestern Papua, and the Cendrawasih block in northwest Papua.

Kofiau is in a geological setting similar to the nearby Salawati basin, which has more than 500 million bbl of oil discovered in Miocene carbonates. Kumawa has large exploration targets in structural traps with Jurassic age fluvial sandstones. Main exploration targets at Cendrawasih are large Miocene carbonate reefs.

Marathon Oil Corp. operates Kumawa with 25% interest, and Niko has 25%. ExxonMobil operates Cendrawasih, and Niko has 25%. Biak Petroleum operates Kofiau, and Niko holds 67% (OGJ Online, May 4, 2009).

Israel

Zion Oil & Gas Inc., Dallas, has spud the Ma’anit-Rehoboth-2 well on the Joseph license in Israel.

A 2,000-hp rig is drilling the directional well to 15,400 ft or Triassic and then below 18,000 ft into Permian rocks (OGJ, July 5, 2004, p. 41).

Italy

First production from Guendalina gas field in the northern Adriatic is expected by the last quarter of 2010, said 20% interest holder Mediterranean Oil & Gas PLC.

Reserves of the Eni-operated field are 19 bcf proved plus 3 bcf probable.

Italy’s environment ministry approved development in early May, and final award of the production concession is expected next quarter.

The reservoir is more than 3,000 m deep in 20 m of water 25 km off Ravenna, Italy. The field is to have a platform and two development wells. Output is expected to be 20 MMcfd.

Northwest Territories

MGM Energy Corp., Calgary, amended its Mackenzie Delta farm-out with Canadian affiliates of Chevron Corp. and BP PLC in Canada’s Northwest Territories.

MGM won’t be required to drill the final three wells or shoot seismic called for in the original agreement until a decision is made in connection with the Mackenzie Valley gas pipeline.

MGM immediately becomes operator and earns the maximum interest available consisting of a 50% interest in the farmout lands and joint discoveries in the Mackenzie Delta.

Three wells to be drilled after a decision to construct the pipeline may be appraisal or development wells at MGM Energy’s option.

Quebec

Corridor Resources Inc., Halifax, NS, deferred until 2010 its application for approval to run a geohazard site survey for a proposed offshore exploration well at the Old Harry prospect in the Gulf of St. Lawrence off Quebec.

The Quebec government’s April 2009 budget calls for undertaking a strategic environmental assessment in the gulf to prepare the path for offshore oil and gas exploration and development.

The government’s timetable indicates this assessment will be completed in 21/2 years. Consequently, the earliest time that a permit could be issued by the Canadian and Quebec governments to drill in Quebec’s sector of the gulf would be 2012.

Pennsylvania

Admiral Bay Resources Inc., Centennial, Colo., took a 50% working interest in up to 6,000 acres in Cambria County, Pa., that provide exposure to the emerging Marcellus shale gas play.

Admiral Bay and its partner in the Revloc coalbed methane project in the Appalachian basin said the acreage appears to be in the fairway for Marcellus prospectivity.

Admiral Bay negotiated pipeline right-of-way, and a tap site is in place. Pipeline construction could begin as early as late 2009.

Texas

West

Arena Resources Inc., Tulsa, added $20 million to its 2009 budget, bringing outlays to $85 million, and will activate a second company owned rig in June at Fuhrman-Mascho field in Andrews County, Tex.

The company has drilled 497 San Andres development wells since mid-2005, including 20 in the quarter ended Mar. 31, with 100% success. The two rigs will have drilled 120 wells in 2009. Arena Resources ran as many as five rigs in 2008.

Drilling and completion costs have declined 26% to $480,000 since the fourth quarter of 2008.

The company completed two of four Yates gas wells drilled in late 2008 at encouraging initial rates consistent with expectations and is accelerating Yates development.

Repeated gas gathering system shutdowns resulted in 64 days of lost sales in the first quarter.

SandRidge Energy Inc., Oklahoma City, is operating four rigs in the West Texas Overthrust and one in East Texas compared with a high of 47 rigs in the second quarter of 2008.

The company averaged 10 rigs and drilled 44 wells in the 2009 first quarter, when it completed and brought on production 61 net wells. First quarter production was up 27% year to year to 319 MMcfed.

As service costs have fallen, the cost to drill and complete a typical Warwick thrust well has declined 34% to $2.2 million. The drilling finding cost for the average Warwick thrust well is currently 98¢/Mcfe.