Feb. 9, 2009 International news for oil and gas professionals For up-to-the-minute news, visit www.ogjonline.com

General Interest - Quick Takes

Indonesia places domestic gas sales over exports

Indonesian Vice-President Jusuf Kalla, on a state visit to Japan, has reaffirmed the need for his country to prioritize its domestic gas market over exports.

"I have spoken to the Japan Bank for International Cooperation (JBIC) that we will help Japan (meet their gas demand) as long as (the transactions) are under a win-win solution," Kalla said.

"We need gas for domestic consumption, but we also need to export gas for foreign exchange reserves," said Kalla who did not detail Indonesia's plans to export gas to Japan this year.

"We have abundant natural resources. Japan is dependent on us, particularly on energy," said Kalla, who hinted that Japan, via JBIC, would increase funding to Indonesia if it could secure gas supplies.

Kalla also said, "It is better for Japan to put its money into Indonesia" than to invest it domestically. Kulla explained that, "domestically, Japan will receive interest of only 0.1%, while it will get a 3% return from lending money to us."

The Indonesian government recently urged gas producers in the country to maintain production or produce more gas to meet rising demand from domestic and overseas markets. Earlier, Indonesia's acting coordinating minister for the economy Sri Mulyani Indrawati said the government has put higher priority on die domestic market than on exports (OGJ Online, Jan. 25, 2009).

Inpex president upbeat about LNG developments

Inpex Pres. Naoki Kuroda, in an interview with Japan's Nikkei Business Daily, remains upbeat on his company's prospects regarding the development of two LNG projects despite the current economic downturn.

Kuroda said Inpex is making a huge investment in LNG at the moment because the lead time for natural resources development is long. "We cannot do anything if we look at only short-term trends."

He acknowledged that demand for resources is falling amid the economic slowdown but the Japanese firm nevertheless plans to start production in Australia in 2015 and in Indonesia the following year.

"We expect that the economy will have recovered and demand for LNG will have increased by then," he said, adding: "It's necessary to continue active investments from medium and long-term perspectives."

Kuroda noted that Inpex expects its two projects to produce 12- 13 million tonnes /year, which accounts for about 20% of domestic demand. "The projects will contribute to a stable energy supply and become a major revenue source for us," he said.

Referring to the amount of investment for each project-$20 billion in Australia and $11.2 billion in Indonesia - Kuroda said Inpex will "sort out the details of the plants before finalizing the amounts."

In fact, Kuroda said the actual costs would be lower than the estimates because equipment prices are falling.

"We will also draw up the best combination of loans and bonds to procure funds," he said, adding: "We can make the projects profitable and keep our finances sound with cautious risk management."

Kuorda said Inpex has yet to start formal sales negotiations, but large-lot customers are showing strong interest. Since LNG releases less carbon dioxide than oil, it is attracting more demand.

Asked if Royal Dutch Shell Group is interested in participating in the Indonesian project, Kuroda said: "More than 10 companies have expressed interest, though we haven't entered into tie-up talks with any of them."

"We have a 100% stake in the project and may consider letting other companies take partial interests," he said.

However, Kuroda downplayed any talk of a shakeout among resource development companies.

"We have no plans for a merger," he said. "What's necessary for growth is to increase our stakes in overseas natural resource projects. We will consider tie-ups with Japanese and foreign competitors on large-scale oil and gas development projects that would be difficult to handle on our own."

Concluding, Kuroda expressed his company's goal, saying that, "Inpex has a daily output equivalent to 400,000 bbl of crude oil at present, and we aim to increase that figure to 800,000-to-l million bbl and join the ranks of the semimajors in the future."

Exploration & Development - Quick Takes

Brazil reports oil, gas finds in Potiguar basin

Brazil's Petro;leo Brasileiro SA (Petrobras) told the country's hydrocarbons regulator Agencia Nacional do Petro;leo (ANP) that it found traces of oil in test wells drilled at two exploration blocks in the Potiguar basin.

ANP said the discoveries were made at well 3-BRSA-695RN on Block POT-T-520, and at well 3 -BRSA- 700DRN on Block BT-POT- 8, both off Brazil's Rio Grande do Norte state.

Petrobras, which reported the finds on Feb. 3, holds 100% stakes in both blocks.

The announcement coincided with earlier reports by ANP that Galp Energia and Petrobras also discovered signs of oil and gas in the Potiguar basin as well as the Sergipe-Alagoas basin.

ANP Feb. 2 said that Galp Energia found traces of hydrocarbons in onshore well 1-GALP-26RN on Potiguar's POT-T-354 Block in addition to signs of oil and gas in an onshore well on SergipeAlagoas' SEAL- T-412 Block. Galp operates both blocks with a 50% stake, while Petrobras holds the remaining 50%.

Last month, Petrobras and its partner Starfish Oil & Gas SA declared a natural gas find at Well 1-STAR-BRN on Block POT-T- 794 onshore, also in the Potiguar basin.

Moosebar shale test drilling in British Columbia

Canada Energy Partners Inc., Vancouver, BC, spudded a horizontal exploration well to Lower Cretaceous Moosebar shale in northeast British Columbia.

The wellsite, near Hudson's Hope west of Dawson Creek, was chosen near the site of an unstimulated natural gas flow that occurred from the Moosebar shale during the drilling of a deeper well for coalbed methane in the Lower Cretaceous Gething formation (OGJ Online, Jan. 5, 2009). Canada Energy is drilling the well, expected to take 2 weeks, in a joint venture with GeoMet Inc., Houston. It is the first horizontal well to target the Moosebar shale on Canada Energy's 50,000-acre Peace River project. Under the joint venture agreement, Canada Energy is operator of the Moosebar shale rights.

In addition to the 50% working interest it already owns, Canada Energy has the right or option to earn an aggregate 75-87.5% interest in the Moosebar shale rights under the acreage subject to certain drilling obligations and elections by the joint venture partner.

BLM sale proceeds; eight tracts deferred

US Interior Secretary Ken Salazar on Feb. 2 ordered the Bureau of Land Management to remove eight tracts from a Feb. 3 oil and gas lease sale after Wyoming Gov. Dave Freudendial expressed concerns about them.

Salazar said his decision was a response to Freudenthal's Feb. 2 letter to BLM Wyoming State Director Don Simpson concerning three parcels near Shoshone National Forest and five parcels adjacent to the Jack Morrow Hills Coordinated Activity Plan boundary.

The lease sale of 137 remaining parcels totaling 163,526.4 acres proceeded as planned, raising nearly $2.4 million from the sale of leasing rights and from rental fees on 112 parcels totaling 121, 706.36 acres, BLM's Wyoming state office said on Feb. 3.

It said that 74.43% of the total acres and 81.75% of the total parcels offered were sold.