When Devon Energy Corp. acquired Santa Fe Snyder Corp. about a year ago, one of the most promising international assets included in the package was the latter's gas fields in north-central Sumatra, in Indonesia. (See "Indonesia," Oil and Gas Investor, August 2000.) At the time, gross oil production on Devon's two blocks was about 21,000 bbl. per day-but it was the natural gas reserves already delineated on the acreage that had the company's eye. The frustration was that Santa Fe and its partners had been waiting for several years for authorities to firm a major contract for Indonesian state oil company Pertamina to sell the gas to PowerGas Ltd. of Singapore. Finally, Devon and its partners announced in February that Pertamina had indeed signed a definitive agreement for the long-awaited contract. The 20-year gas sales agreement calls for 150 million cu. ft. per day to flow to Singapore beginning in 2003. Deliveries will increase in time, to peak at 350 million a day by 2009. Devon's net share of the supply will range from 26- to 48 million cu. ft. of gas per day at the peak. Devon will supply gas for this deal from its Jabung and South Jambi B blocks. Devon operates Jabung with a 30% interest. Its partners are Amerada Hess, 30%; Kerr-McGee Sumatra Ltd., 30%; and Pertamina EP, 10%. At South Jambi B, Gulf Indonesia Resources Ltd., a unit of Gulf Canada, operates with a 45% working interest. Devon has 30% and Pertamina EP, 25%. The agreement will have a positive impact on Devon's gas liquids and condensate production as well, the company says. An estimated 15,000 bbl. of liquids and 11,000 per day of condensate will be produced initially, and sold into the growing Asian market. "Development of export markets is a key to unlocking the potential of our substantial gas reserves in Indonesia," says Duane Radtke, president of Devon International. In the Pearl River Mouth Basin of the South China Sea, Devon has been adjusting its holdings, to 50% interest in 2.9 million (net) acres in the area, after having sold 50% to Energy Development Corp. (China) Inc. , a unit of Noble Affiliates Inc. The deal includes a half-interest in blocks 16/02, 16/05 and 26/35, providing Houston-based Noble with an entrée to this area. Through EDC it has production-sharing contracts on shore in northern China as well. Devon also relinquished Block 15/26. And last year, Devon's former partner in Block 15/24, Baker Hughes E&P Solutions, sold its interest to Burlington Resources, providing the Houston company with its own entree to the same area. Now that Noble has become a partner, Devon will proceed later this year with three exploration wells that originally were scheduled for late 2000. The partners hope to find pay in the 40 productive zones found in the area. Meanwhile, development and planning continue in order to bring production onstream from the Ursa/Bootes complex in mid-2003, where Devon estimates production will be about 40,000 bbl. per day, gross. Elsewhere in South China, BP recently won a hotly contested race among several majors to get exclusive negotiating rights to build and operate China's first LNG terminal, in partnership with newly public China National Offshore Oil Co. The new plant will be sited near Shenzhen, a booming city in Guangdong Province northwest of Hong Kong. (See "The South China Sea," March 2001.) BP will have a 30% stake. The plant will have a capacity of 3 million tons per year, with first operation now scheduled for 2005. LNG supplies are likely to come from Australia's Northwest Shelf and Indonesia. The 20-year supply contract could be worth up to $10 billion. Some of the largest companies producing natural gas in Asia vied for this $600-million contract, as they will have substantial additional supplies coming onstream soon in Indonesia, Malaysia and Australia's Northwest Shelf. The LNG plant reflects China's desire to reduce reliance on coal and increase natural gas use to meet 8% of its energy needs by 2010.
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