BP, Pertamina ink US$280m oil block transaction

Alfian ,  THE JAKARTA POST ,  JAKARTA   |  Fri, 06/26/2009 1:25 PM  |  Business

Europe's second largest oil company energy BP has agreed to sell a 46 percent participating interest in the offshore North West Java (ONWJ) oil and gas block to state oil and gas company PT Pertamina in an acquisition said to be worth US$280 million.

Pertamina secures BP's interest in the block by purchasing 100 percent of BP West Java Limited (BPWJ), which is the operator of the ONWJ block and holds a controlling 46 percent stake in it. This was confirmed by Pertamina's president director Karen Agustiawan and BP Indonesia's president William Lin speaking to reporters together after signing the acquisition agreement on Thursday.

BP and Pertamina expect to complete the acquisition transactions and legal procedures by June 30. Pertamina will then take over the operation of the block.

Karen said that Pertamina had been considering making the acquisition of the ONWJ block for a long time as the it will enable the company to benefit from further integration of its operations in the offshore North Java sector.

"I have been eyeing the block since I was an upstream director," Karen said. "With this acquisition, we can extend our assets near the concession next to the BP's assets," Karen said.

"The acquisition is a milestone for Pertamina. The decision is in line with our strategy to focus on upstream *business* which contributes up to 70 percent of our profits," she added. Last year Pertamina produced a total of 54.4 million barrels oil. "Our share holders want us to increase oil production by 14 percent this year," Karen said.

The ONWJ concession covers an area of 8,300 square kilometers offshore West Java stretching from Cirebon to Kepulauan Seribu (the thousand islands). Facilities include 314 producing wells and 218 offshore structures.

The block's current average gross production is approximately 22,000 barrels oil per day and 220 million cubic feet of gas, BP said in a statement. "We expect to increase the production of the block," said Karen without mentioning her production target for the block in the future.

The ONWJ block supplies gas for power generation, industry and households in the Greater Jakarta and West Java areas. BP and Pertamina said the transfer of ownership and of operating responsibilities would not affect continuity and security of supply to customers.

Earlier Pertamina was reportedly seeking cooperation with Indika Energy in respect of the acquisition of the block, but on Thursday Karen confirmed that Pertamina would enter the block alone. "We will not be seeking other partners. We will finance the acquisition from our own equity," Karen said.

Other shareholders of the block are China's CNOOC (36.72 percent); Japan 's Inpex Corp. (7.25 percent); Orchard Energy Java B.V. (5 percent); Itochu Oil Exploration Co. Ltd (2.58 percent); and Talisman Resources Ltd (2.45 percent).

BP said the sale would not affect BP's other interest in Indonesia.

"Indonesia is an important country for BP, where we are focusing our upstream oil and gas interests on the continuing development of our VICO joint venture in Kalimantan and our Tangguh LNG project in Papua," Andy Inglis, BP's chief executive of exploration and production said in a statement.

BP and Pertamina have also agreed to cooperate on developing coal bed methane (CBM) in Indonesia .

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