INDONESIA - South-East Sumatra - CNOOC Venture.

In January 2002, the state-owned China National Offshore Oil Corp. (CNOOC), bought almost all the Indonesian assets of Repsol-YPF for $585m. The unit price CNOOC paid was about $1.60/b oe. (The only asset Repsol has since kept in Indonesia is its 25% state in a JOB with Petramina at the Jambi-Merang gas field - see above). Thus, CNOOC became the biggest offshore oil producer in Indonesia, with an output averaging less than 21,000 b/d, down from about 125,000 b/d in early 2003, concentrated off South-East Sumatra. On Sept. 26, 2002, CNOOC signed a 25-year contract to buy 2.6m t/y of LNG from BP's Tangguh JV in Papua. CNOOC's acquired assets are: 65.34% in the South-East Sumatra (SES) PSC, 36.72% in the offshore North-West Java PSC, 25% in the West Madura PSC, 50% in the Poleng PSC, and 16.7% in the Blora PSC - with Pertamina being one of the partners in all of them.

Repsol had acquired these SES assets from Maxus, part of YPF of Argentina which the Spanish major had bought in 1999. The assets feature the Widuri system, where two oilfields have been producing since late 1990 together with smaller structures. Intan and Widuri were found in the 1980s by Maxus. With Widuri brought on stream in late 1990, their combined capacity was to be expanded to more than 250,000 b/d, with Widuri alone to produce about 70,000 b/d. But actual output has dropped fast since 2003. Widuri oil is waxy but with low sulphur suitable for direct burning by power plants in Japan and other markets. CNOOC's other fields are Cinta and satellite structures. A processing complex takes the output from more than 60 wells on seven remote-production platforms. The crude stream is pumped to a floating storage and offloading (FSO) vessel. This area's proven oil reserves were in 2002 put at 235m barrels. CNOOC also produces from a North-West Java offshore field, found by Maxus. In 1991-95, Maxus had drilled 39 exploration wells in Indonesia and had made nine discoveries.

CNOOC is developing the Banuwati gas field and satellite structures on one of the SES offshore blocks. Offshore facilities will comprise a six-legged central production and processing platform; a 16-inch wet gas marine pipeline from new platform (designated Banuwati-B) and the Zelda PC platform; and eight-inch wet gas intrafield lines at the producing Zelda field. Water depths in the area average 30 metres. Gas from Banuwati will be sent to Java through a new 20-inch pipeline from Pabelokan Island, which is the operational nucleus of the SES system. Initial gas production and deliveries to Java will average 100 MCF/d. The project will also require new onshore gas receiving and processing facilities to be built at Teluk Banten near existing plants. CNOOC's aim is to exploit 600 BCF of proven reserves on this PSC. CNOOC's partners in this PSC are Paladin Resources and Pertamina.

In the offshore West Madura block, where the operator is Kodeco Energy of South Korea, with CNOOC having a 25% stake, an important discovery was made in mid-2002. A wildcat at the Kujung 3 Fm yielded 2,400 b/d of oil and 1.7 MCF/d of gas. In 2001 three successful wells - KE 23-1, KE 13-1 & KE 24-1 - flowed a combined 6,300 b/d of oil and 30.1 MCF/d of gas from the same Fm. In late 2002, Kodeco's KE 40-2 appraisal, drilled to 2,206m, encountered 53m of gas pay in the Kujung 1 carbonate reef build up and 8.6m of oil pay in the Kujung 3 limestones. A drillstem test on the latter Fm produced 1,430 b/d of oil and 6.86 MCF/d of gas through a one-inch choke. The field has been developed, with the oil exported and the gas sold on Java island.

Java, with a population of more than 125m, is by far the biggest market in Indonesia for gas and power. It is acutely short of both as this is where about half the country's large and medium-sized businesses are located. Businesses are queuing for new gas supplies from both nearby and distant producers.