Medco plans investments worth $1.6b from 2011-2013

Publicly-listed energy firm PT Medco Energi Internasional is planning capital expenditures of US$1.6 billion over the next three years, the company says.

President commissioner Hilmi Panigoro told reporters on Tuesday the capital expenditures would be mainly committed to the company’s three major projects: a gas field in Aceh known as the Blok-A, the Donggi Senoro LNG project in Central Sulawesi and the Area-47 oil field in Libya.

Medco, through its subsidiary PT Medco Energy E&P, secured a 20-year extension of its production sharing contract (PSC) at Blok-A in East Aceh. Initially, the contract would have expired on Aug. 31, 2011. Medco E&P’s president director Budi Basuki said the Blok-A development would require a $608 million investment, and was expected to begin producing gas in the second quarter of 2013.

Medco also holds a 20 percent stake in the Donggi Senoro LNG project planned to be built in Central Sulawesi. The project was delayed for two years due to the government’s indecisiveness over gas allocation from the Senoro and Matindok fields, which were initially intended to supply the LNG plant. However, in June this year the Energy and Mineral Resources Ministry decided that between 25 to 30 percent of the gas must be allocated to the domestic market, meaning that the plant would still receive up to 75 percent of the gas.

“Now we are waiting for the gas sales agreement [GSA] and sales appointed agreement [SAA] to be signed. If they are signed soon, our capital expenditures will increase significantly next year,” Hilmi said.

Another project that would require significant investment next year was the development of an oil field known as Area-47 in Libya, Hilmi added. Medco owns a 50 percent stake in the field, while the Libyan Investment Authority owns the remaining working interest.

Currently, Encore Energy Pte Ltd owns a majority 50.7 percent shares in Medco. State oil and gas company PT Pertamina is in the process of acquiring part of Encore’s shares currently owned by Encore International Ltd. The acquisition will grant Pertamina an indirect 29.7 percent stake in Medco.