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T Saka Energi Indonesia, subsidiary of publicly listed gas distributor PT Perusahaan Gas Negara (PGN), agreed to buy the participating interest of Kuwait Foreign Petroleum Exploration Company (Kufpec) in a gas field in East Java.

PGN corporate communications Ridha Ababil on Tuesday said the state-owned company'€™s upstream arm would purchase Kufpec'€™s 25 participating interest at the Ujung Pangkah block in Gresik, East Java for US$265 million.

'€œWe [PGN] want to try involving ourselves in the procurement of oil and gas because until now we only received and distributed,'€ he said in a telephone interview.

PGN runs sales and transmission businesses in East Java, Jakarta, several parts of West Java and Sumatra. In addition, the firm also distributes and sells gas from gas suppliers to domestic and industrial users.

In March this year, PGN president director Hendi Prio Santoso said the company was contemplating investing in a number of blocks across the archipelago through Saka Energi.

Saka Energi recently signed an agreement to buy a 20 percent participating interest in the Ketapang PSC gas block in East Java from Sierra Oil Services Ltd. Petronas Carigali, which owns the other 80 percent participating interest, is the operator of the block and is expected to begin commercial production in 2014.

Ridha declined to elaborate on PGN'€™s aims for the recent acquisition, saying that both Saka Energi and Kufpec were keeping schtum about the fine points of the transaction.

Kufpec officials did not answer emails sent by The Jakarta Post on Tuesday.

Kufpec bought the participating interest in the block from American oil and gas giant ConocoPhillips in 2007. In Indonesia, Kufpec also owns stakes in Natuna Sea Block A and Seram block.

The Ujung Pangkah block, operated by New York-based Hess Corporation, which holds 75 percent participating interest, currently produces 40 million meters standard cubic feet per day (mmscfd) of natural gas and 7,000 barrels per day (bpd) of oil and condensate.

Located 50 kilometers from East Java'€™s industrial center in Surabaya, the Ujung Pangkah block'€™s oil and gas output is currently lower than its peak production of 60 mmscfd of gas in 2009 and 13,000 bpd of crude oil in 2011.

Rudi Rubiandini, head of the upstream oil and gas watchdog SKKMigas, said separately that the Hess Corporation, operator of the Ujung Pangkah block since 2007, was also planning to sell its assets at the Ujung Pangkah block.

'€œThey have told us they have the intention to sell their assets [Ujung Pangkah] but the plan has yet to be executed,'€ said Rudi.

Hess, which is among scores of oil and gas contractors suffered enormous losses from 2009 to 2012 in fruitless exploration, previously returned its Semai V block in West Papua after losing $222.7 million without finding profitable hydrocarbon reserves.

Other oil and gas contractors are looking to leave Indonesia, a former OPEC member, Texas-based Anadarko, for example, sold its assets to state-owned oil and gas firm Pertamina, hinting that it was ready to leave the country.

Despite the current situation, PGN'€™s Ridha said the firm remained '€œconfident'€ that the acquisition would, in the long-run, bring profit, citing that Saka Energi '€œhas their own consultant for the upstream oil and gas business and, thus, PGN believes the assets [we have acquired] would benefit us'€.

Following reports of the Kufpec assets acquisition, PGN'€™s shares, traded under the code PGAS closed at Rp 4,975 on Tuesday, up 6.99 percent from Rp 4,650 on Monday.