ConocoPhillips puts Indonesian assets up for sale
Only months after promising to increase investment in the country, ConocoPhillips is seeking a buyer for its assets
US major ConocoPhillips is seeking buyers for its legacy Block B fields in the Natuna Sea, along with its transportation infrastructure and onshore receiving plant.
The potential pullback comes only four months after ConocoPhillips’ chief executive Ryan Lance visited president Joko Widodo and pledged to increase investment in Indonesia. At the time, energy and mineral resources minister Sudirman Said revealed the US company planned to invest $2.5bn over the next three to four years, a similar amount as in the previous four years.
ConocoPhillips dismissed suggestions that the move was in response to low oil prices. Some analysts believe the uncertain fiscal and regulatory environment in southeast Asia’s largest oil and gas producer could be to blame. The sector was thrown into turmoil when the then upstream regulator BPMigas was disbanded by the constitutional court in 2012.
As a result, a new oil and gas law is in the works, that investors hope will improve the business environment.
ConocoPhillips has held the block for 47 years and is entitled to run it until 2028. It operates the South Natuna Block B with a 40% interest on behalf of partners Inpex of Japan (35%) and US major Chevron (25%).
The block is expected to produce 335m cf/day of gas and 30,000 b/d of liquids this year, according to data from Upstream Oil and Gas Regulatory Special Task Force (SKKMigas), which temporarily replaces BPMigas, shows.
Block B sits under about 300 ft of water and has 11 offshore platforms, four producing subsea fields, and one FPSO in addition to two dedicated floating storage and offloading vessels. The infrastructure supports three producing oil fields, as well as 16 natural gas fields. Eight of the gas fields are in production, of which five have associated recoverable oil or condensate volumes.
Several analysts Petroleum Economist spoke to said that the block is a quality asset and would definitely attract buyers.
A spokesman for ConocoPhillips, which produces almost a fifth of Indonesia’s total gas output, said the decision did not mean the company was seeking to exit the country.
ConocoPhillips was recently awarded the Kualakurun Block in Kalimantan and is continuing operations in the Corridor Block in South Sumatra – which is expected to produce 956m cf/d of gas this year. It also has stakes in the South Jambi B Block in South Sumatra, the Warim Block in Papua and the frontier Palangkaraya Block in Kalimantan.
Wood Mackenzie estimates Indonesia’s remaining reserves at 27.8bn boe, of which 10.4bn boe are either already onstream, under development or likely to be sanctioned for development in the next few years. A further 2.7bn boe could be potentially developed, based on the energy research company's estimates.