Indonesia

October 24, 2010

kangean

East Java gas to ramp up

The East Java gas pipeline in Indonesia is on track to have its gas exports significantly boosted when the Terang-Sirasun-Batur (TSB) gas fields in the Kangean Block PSC come online in 1Q 2012.

BW Offshore has signed an $875 million contract with Kangean Energy Indonesia to deliver a gas FPSO to operate in the TSB fields, located within the 4500km2 Kangean block, about 120km east of Madura Island and 80km north of Bali. BW Offshore in turn has a contract with its two Indonesian partners, PT Pelayaran Trans Parau Sorat and PT Energi Consulting Indonesia.

The workscope for BW Offshore includes delivery of the FPSO on an initial 10-year charter, risers, umbilicals and mooring system, as well as the responsibility for installation and operation of the unit. Design, fabrication and installation of the mooring system will be executed by APL, a division of BW Offshore.

The FPSO will have the capacity to process, dehydrate and compress 340mmscf/d of gas for transport through the East Java pipeline to East Java for power generation and distribution by the state electric utility PT PLN (Persero).

The TSB fields, discovered in the period 1982-1995, will be developed in two phases, the first to consist of five wells in the Terang field producing from subsea trees in a water depth of 100m to the FPSO. The second phase will involve four subsea wells – one in Batur and three in Sirasun – both fields in 200m of water, also to be tied in. Connection to the pipeline will be by subsea hThe TSB

fields, discovered in the period 1982-1995, will be developed in two phases, the first to consist of five wells in the Terang field producing from subsea trees in a water depth of 100m to the FPSO. The second phase will involve four subsea wells – one in Batur and three in Sirasun – both fields in 200m of water, also to be tied in. Connection to the pipeline will be by subsea hot-tap.

The 425km long pipeline, part of the Pagerungan Island gas development (pictured), has been carrying gas from the BP-operated offshore Pagerungan gas field since 1993, reaching a plateau of 600mmcf/d in the late 1990s, but greatly reduced since.

Production is anticipated to initially reach around 300mmcf/d from the Terang field and subsequently reinforced when Sirasun and Batur come onstream, forecast to be three years down the line.

The geology of the TSB reservoirs primarily consists of sandstone in the Terang field with 36-42% porosity and limestone in the Batur and Sirasun fields with 45-50% porosity. The low pressure gas reservoirs, containing around 1tcf of recoverable gas, have tops at depths of 650m to 950m and gas columns up to 90m. The gas is over 98% methane with no H2S or CO2 and no condensate.

The KEI partners in the Kangean Block PSC are PT Energi Mega Persada (50%), Mitsubishi Corporation (25%) and Japan Petroleum Exploration (25%).

Reserves downgraded

The Kambuna gas-condensate field, offshore the northeast coast of Sumatra which commenced production 3Q 2009 and is currently outputting 42mmcf/d of gas and 3700b/d of condensate, has been determined to have recoverable gas reserves lower than previously estimated based on initial downhole pressure data recorded in one of the wells.

As the result of an independent audit by RPS Energy, Salamander, operator of the Galagah-Kambuna TAC and 50% stake holder, has reduced 2P reserves attributable to the Kambuna field by 1.8mmboe to 6.5mmboe.

On a 2P basis, production from Kambuna is expected to remain at current levels until at least 2013. Although a gradual decline is anticipated thereafter, production may be maintained at or near plateau beyond 2013 in a 3P case or should contingent resources be converted to recoverable reserves.

In addition to possible gas and condensate reserves, over and above 2P reserves, of 32bcf and 2.1mmb, respectively, in the 384km2 Kambuna field, the partners are also working towards commercialising contingent gas resources estimated at 55bcf of gas.

Husky Indonesian E&P

Husky Energy and CNOOC have received approval for the Madura BD field development plan in the Madura Strait PSC, offshore East Java, for which it has 20-year sales agreements for 100mmcf/d of gas.

Engineering work has been tendered but work will not proceed until a request for an extension of the production sharing contract, expiring in early 4Q 2012, has been sanctioned. Production is expected about three years after that.

Husky has a 50% interest in the 2795km² Madura Strait PSC, which has two natural gas fields, the larger Madura BD field having been granted commercial status in 1997.

CNOOC has a 50% equity interest in Husky Oil (Madura) which holds 100% of the Madura Strait PSC.

In the North Sumbawa II Block, also in the East Java Sea and 100% held by Husky, 1020km of 2D seismic gathered in 4Q 2009 is being interpreted to define prospects, the first well expected to be drilled in 2011.

North Sumbawa II covers 5058km2 and is located about 300km east of the Madura Strait PSC and 150km north of Sumbawa Island.



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