Alkor Petroo in talks for stakes in two Indonesian fields

Vol 10, PW 24 (05 Apr 07) Exploration & Production

Hyderabad-based explorer Alkor Petroo is in talks to farm-in to two onland marginal fields formerly held by state-owned Pertamina of Indonesia on the island of Sumatra, the country’s main hydrocarbon bearing province.

PETROWATCH learns Alkor is talking to Singapore-based OilTech EP for a farm-in of up to 35%. OilTech’s subsidiary signed PSCs for the two blocks in February.

“Both fields were carved out by the government from other fields,â€‌ we hear. “They are discovered and delineated fields surrounded by other discovered fields.

â€‌ For Pertamina, these are marginal fields and uneconomical to develop, part of several auctioned off last year. Discussions between Alkor and OilTech are at an advanced stage.

“Sharing of past costs, signature bonuses and local social development bonus are being discussed,â€‌ says a source. All discussions must be completed by the second week of April, the deadline set by OilTech for the farm-in.

If successful, both companies will jointly operate the fields. Alkor is doing an in-house evaluation of reserves on both fields and is happy with what it sees.

One field holds 11m barrels of proven (P1) reserves while the other holds 7.5m barrels (P1). Each field measures between 25-30-sq km and both were producing for Pertamina for eight years until production ceased five years ago.

Alkor estimates that its share of the total estimated production of between 2400 b/d and 3000 b/d from both fields would be 1100 b/d over eight years. Production costs are not expected to be high, as all the wells are shallow – between 1000 and 1100 metres depth.

More, the operator will not have to worry about marketing, as all production will be sold to Pertamina at global crude prices. “On average the production cost of each well, including workover, is likely to be around $350,000.

â€‌ Under Indonesia’s PSC, CAPEX is cost recoverable up to a maximum 80% each year. Importantly, the crude is very light, with an API number of 46 degrees.

“This quality crude will fetch a good price,â€‌ we are told.