ASEAN Energy News Service

Source: Antara, 23 May 2008

The government Friday awarded five oil and gas blocks, including the highly potential Kasuri Block in Papua, to five winning bidders.

General Oil and Gas director Luluk Sumiarso said the winner of Kasuri block was Malaysian oil and gas firm Genting Oil & Gas Ltd.

The four other winners are Italian ENI Indonesia Ltd, which won the West Timor block; a consortium of Chinese CNOOC Southeast Asia Ltd and Malaysian Petronas Carigali Overseas Sdn Bhd, which was awarded the Southeast Palung Aru block; Swedish Lundin Oil and Gas BV was awarded the Rangkas block; and U.S.-based Murphy Overseas Ventures Inc the South Barito block.

The five oil and gas blocks are part of 2007-08 auctions.

Luluk said the total exploration commitment for the five blocks reached US$201.45 million for three years.

“The government immediately received $24.4 million as signature bonus,” he said.

“I hope the winning bidders start exploration activities and find the oil and gas deposits because they have already paid quite the sum of money.”

Luluk said the government would get more income once oil and gas was discovered in the blocks.

State-owned oil company PT Pertamina has the rights to a maximum 15 percent of shares in each block due to a business deal made with each concession holder.

Luluk said the government will auction another 46 blocks this year. Twenty-five of these blocks will be offered on May 29, while the remaining 21 will be offered sometime in October.

Indonesia needs to find more oil and gas deposits as its annual oil production has been dwindling over the past years due to old fields and a lack of exploration.

Source: Bangkok Post, 23 May 2008

Buoyed by rising oil prices, Bangchak Petroleum Plc is confident that its earnings in the second quarter will be at least 15% higher than in the first quarter, according to Patiparn Sukorndhaman, senior executive vice-president. The majority state-owned oil refiner has finally turned the corner after 10 years of poor financial performance, mainly because its ageing facilities delivered margins far below those of its peers. Recent upgrades have positioned the company to do better in the future.

‘’The first quarter was only the beginning as we made such a good jump even though we had a 45-day maintenance shutdown,'’ Mr Patiparn said. ‘’Our earnings should go upward in the years ahead.'’

The company now expects its earnings before interest, tax, depreciation and amortisation (EBITDA) to rise by at least 15% in the current quarter from 277 million baht in the first quarter.

The oil refinery business accounted for 92% of EBITDA in the first quarter and the retail oil business the rest.

Bangchak reported a consolidated net profit of 852 million baht in the first quarter, compared with a loss of 41.9 million in the same period last year. Sales revenue rose 49.4% to 29.8 billion baht.

The company anticipates an improved gross refinery margin (GRM) after it completes its product quality improvement (PQI) programme in September, when output of low-margin fuel-oil will be reduced to 9% from the current 30% of total output.

Margins began improving in the first quarter and bangchak increased average capacity to 66,000 barrels a day, with a full-year target of 70,000 barrels, rising to 100,000 barrels next year.

The company hopes that the PQI programme will bring its GRM close to that of other refineries, which are currently $3 to $4 a barrel higher than Bangchak’s.

Its GRM in the first quarter averaged $5.66 per barrel, up from $3.81 a year earlier, thanks to skyrocketing oil prices, said Mr Patiparn, as refining margins are linked closely with oil prices.

The reference price for crude on the Dubai market rose 64.3% in the first quarter to $91.09 a barrel, from $55.43 in the first quarter of last year. The average spread margin from Dubai crude to refined oil is now $42 a barrel, up from $22 in the first quarter.

Mr Patiparn said, however, that production costs were also soaring just as they have for other businesses as a result of oil prices. However, BCP has secured some crude sources from local fields, resulting in cheaper logistics costs.

However, the retail oil business is still struggling since pump prices do not cover total costs. BCP says it loses about one baht per litre from all fuel types.

Due to the momentum of alternative fuel consumption, its share in the retail market has risen to 13.5% from 12.5% at the end of last year, as BCP stations carry more gasohol and biodiesel varieties than rival operators.

BCP shares closed yesterday on the Stock Exchange of Thailand at 12.70 baht, down 20 satang, in trade worth 733.1 million baht.

Source: The Manila Times, 21 May 2008

BACOLOD CITY: The forum between the proponents as well as those opposed to the geothermal development expansion of the Philippine National Oil Company-Energy Development Corp. (PNOC-EDC) at the buffer zone of the Mt. Kanlaon National Park remained at a standoff after the five-hour dialog led by the Department of Energy at L’Fisher Hotel on Monday.All indications point to allowing PNOC to enter the buffer zone for geothermal expansion development with or without the Sangguniang Panlalawigan’s concurrence, where a request has been pending the last two months because of the strong opposition backed by the Catholic Church.

Energy Secretary Angelo Reyes said while he empathized with the environmental groups’ opposition, stressing he is an “environmental advocate,“ there is a law in place that allows PNOC to legally enter the buffer zone and source additional geothermal energy.

Reyes, who spearheaded the dialog after suggesting such to Bacolod Bishop Vicente Navarra, said he was satisfied that all sides were being given an opportunity to present their case.

The decent thing to do was to exhaust all efforts to ensure that the decision is highly desirable to everybody, Reyes said, but he also stressed that, “there is a law and in the end, we do what has to be done and abide with the law.”

Reyes was alluding to the law creating the buffer zone that allows PNOC to conduct geothermal exploration. The matter of seeking the provincial council’s approval where it is currently pending was merely a courtesy granted to the host province.

While not categorically stating that he is for the entry of PNOC, the fact that he stressed on the existence of the law that should be respected is indication that PNOC faces no legal impediment in entering and operating within the buffer zone.

Reyes appealed to everyone to “rally around” when a decision is made and hopes that the Sangguniang Panlalawigan will “decide for the common good of the people.”

Meanwhile, Negros Occidental Gov. Isidro Zayco said he would support whatever decision made by the Sangguniang Panlalawigan. He simply appealed to PNOC to prioritize Negros for their power supply, make the electric rates “reasonable,” and “meticulously observe the environmental concerns.”

Bishop Navarra and the opposition, however, remained firm on their stand that the issue is non-negotiable, this despite the assurance of PNOC that they will replant, if need be, 20 trees for every one tree they cut down.

This did not allay the fears of the environmental groups, however, who claim that the entry of PNOC will do irreparable damage to the remaining forest reserve in Negros Occidental.

Source: Manila Standard Today, 21 May 2008

THE peso fell to its lowest level since November, going back to 43 against the dollar on risk aversion and growing concerns on inflation and the Philippines’ fiscal performance, analysts said.

The currency fell even as oil prices held steady in Asia yesterday after closing overnight above $127 a barrel for the first time, and on news that Opec will not increase its output before its next meeting in September.

The peso opened at 42.82 and hit a high of 42.81 before closing at 43. Volume turnover was $715.075 million, about double Monday’s trade, with the peso averaging at 42.95.

Most analysts expect the unit to continue to weaken, but some say a correction may be due.

“It’s more of the regional uptrend of the dollar against regional currencies,” said Rafael Algarra Jr., senior vice president at Security Bank.

“The trend is still for a weaker peso and a stronger dollar. Forty-three should be a strong resistance, but there is short-term pressure on the peso.”

“Forty-three was definitely just around the corner. We’re looking at P43.50 soon,” said Horacio Cebrero III, vice president and treasurer at East West Banking Corp.

“The dollar will trade higher in the coming sessions because of the uncertainty. On the domestic front, there’s a growing concern on a possible fiscal slippage because of the subsidies on rice and rising inflation.”

Overseas, he said, investors were risk-averse because of rising inflation and concerns about how it would affect Asian economies. As a result, investors who came in betting on a peso appreciation and a balanced budget were now bailing out.

Metropolitan Bank and Trust Co., the Philippines’ largest bank, said the peso’s fall would depend largely on the central bank.

“Market bias is still for a higher dollar,” the bank said in a commentary yesterday.

“Dollar bulls may again attempt to test the [central bank’s] resolve at 42.85 on the way to the 43.00 handle. However, we are seeing a short- term corrective move as we feel the market is already dollar overbought”

The central bank has already revised its forecast on the foreign exchange rate for the year and is assuming a weaker peso. It lowered its forecast to 43 to 45 from 40 to 43 to take into account recent developments in the global financial markets.

Source: The Jakarta Post, 19 May 2008

Upstream oil and gas regulator BPMigas is responsible for ensuring oil and gas contractors operating in the country generate full benefit for the people, as demanded by the 1945 Constitution.

However, data since its inception in 2002 indicate the regulator has not lived up to these expectations, particularly its failure to reverse the trend of declining oil production, which has contracted by an average of 4 percent per year since 1995.

Despite the negative production growth, the cost recovery paid by the state to oil and gas contractors continues to grow, to US$8.33 billion last year, up from $7.8 billion in 2006 and $7.3 billion in 2005.

In response to growing criticism from the public and lawmakers, the government recently replaced the head of BPMigas with Priyono, a former upstream director at the Energy and Mineral Resources Ministry.

To gain insight on what is in store for BPMigas, The Jakarta Post’s Ika Krismantari talked recently with Priyono. The following are excerpts from the interview.

What are your priorities now as the new chairman of BPMigas?

I have set two main priorities under my authority, which are increasing production and controlling the cost that can be recovered during exploration activities.

I also want to cut the bureaucratic process within the BPMigas, which is notoriously known to be too complicated. I have decided to change the previous system of cross-function with self-supervision. The new system will enable operators to complete one matter in one division, which is tasked to oversee that matter, without having to double-check it with other divisions.

I will put in place self-monitoring for cost recovery in each division, so they don’t have to completely depend on the supervision of the financial department, as has been done so far.

How you are going to reverse the production decline?

One of the efforts we will carry out is promoting enhanced oil recovery technology in several aging fields, to maintain the level of production. We also want to optimize the development of idle and abandoned fields by easing the procedures for getting permits.

One thing to remember that this sector has different characteristics compared to other sectors. The oil and gas sector requires long-term investment, which mostly take 5 to 10 years to show results.

If we look at the data on production activities now, these operations come from investment that was put there several years ago.

So, I hope that 2008 can be a turning point for us to increase production, as 13 oil and gas blocks are expected to come onstream this year, producing about 47,100 barrels of oil equivalent per day. Among those fields are Cepu block with an expected daily output of 20,000 barrels per day and Tangguh blocks with a total production of 7.6 metric tons per annum.

Does that mean the country will meet the production target of 977,000 barrels of oil a day this year?

Yes, I hope so. The country’s oil production reached 955,847 barrels per day in January, 986,848 barrels per day in February, 985,872 in March and 978,960 in April. We will strive to reach a production of 1 million barrels of oil by the end of this year.

I think the country will not find it difficult to meet this year’s oil production target. To try and increase production, I will also expedite the process in submitting the plan of developments (POD) and put on operation (POP) to make it easier for contractors to carry out exploration activities and speed up the production process.

How do you see the public’s negative perception of the assessment of the cost recovery and what will you do in the future to fix this?

One thing to remember is that this issue does not only happen in the oil and gas sector. Other fields also experience this kind of excess.

What people don’t know is that aside from cost recovery, there are exploration costs, which we don’t reimburse if the contractors fail to find reserves. The cost is a lot larger than cost recovery. Cost recovery means nothing compared to other expenses of the contractors.

To make a better cost recovery regulatory framework, what we are going to do is close the loopholes, so that the opportunity for the contractors to get “naughty’ and recover all their costs will be smaller.

The new cost recovery policy will be a clear-cut regulation with more details in mentioning what kind of costs can be recovered, not like what exists now … which only mentions the item Petroleum Operation as one of things that can be claimed back, without explaining in detail what Petroleum Operations are.

So there will be no cost recovery for dental checkups in Singapore and no cost recovery for vacations. We only reimburse costs related to production activities.

I will also set up a special task force to try to map the exploration costs, which costs deserve to be recovered. The task force will work intensively and as soon as their job finishes, I will issue a notification letter mentioning in detail what costs cannot be recovered.

With global oil prices surpassing US$120 a barrel, what are the production split arrangements and will the new contracts include price escalation calculations like the one applied in the Cepu block contract?

We still stick with 85 percent to 15 percent in favor of the government in terms of oil production, and 65 percent to 35 percent in favor of the government in terms of gas production. We think with oil prices hitting new records, such arrangements are still attractive for investors.

About the possibility of including price escalation in the contracts, we have proposed the idea to the director general of oil and gas, and the decision is now in their hands.

Source: The Jakarta Post, 16 May 2008

JAKARTA: Publicly listed upstream oil and gas services company PT Elnusa has secured 11 seismic projects this year as it pursues its sales revenue target of US$75 million (Rp 695 billion), a company official says.

“The 11 projects will account for around 80 percent of our sales revenue target. We are still looking to win a few other projects to gain the remaining 20 percent,” Hendri S. Suardi, Elnusa’s director of administration and finance, said Thursday.

Among the 11 is a US$36 million supply contract with an oilfield owned by BP Indonesia and M3 Energy in Cilegon.

The projects follow the company’s strategy to focus on upstream oil and gas services, which include seismic surveys of oil fields, drilling and oil fields management.

Hendri said Elnusa, a subsidiary of state oil and gas firm PT Pertamina, has prepared loans of around US$90 million through a consortium between Bank BCA, Bank Danamon and Natixis of France to support its projects.

Source: Bangkok Post, 15 May 2008

Siam Gas, one of the country’s largest cooking gas manufacturers, will float 280 million shares at eight baht each in its initial public offering starting from today to Wednesday.

The pricing of the offering has been set at nine times earnings. The stock will list on the Stock Exchange of Thailand on June 3.

Supachai Weeraborwornpong, the SGP managing director, said the company would use proceeds from the IPO to add 20 stations nationwide, half under the Siam Gas name and the rest under the Unique Gas brand.

Funds would also be used to finance construction of an LPG (liquefied petroleum gas) depot and a filling plant in Vietnam.

SGP reported first-quarter profits of 176 million baht on revenues of 4.4 billion, up from profits of 90 million on revenues of four billion in the same period last year.

Chupong Tanasettakorn, the managing director of lead underwriter KTB Securities, said that the shares of SGP were expected to appeal to both retail and institutional investors. He expected the offering to be more than two times oversubscribed, considering the strong growth prospects for the energy sector.

‘’We see bright prospects for SGP, as high oil prices encourage more consumers to switch to LPG or NGV (natural gas for vehicles),'’ Mr Chupong said.

SGP is in talks with the Energy Ministry to retrofit its LPG stations to offer NGV.

Co-underwriters for the offering include Kim Eng Securities, ACL Securities, AIRA Securities, Capital Nomura Securities, Merchant Partner Securities, and Siam City Securities.

Source: The Jakarta Post, 15 May 2008

To encourage oil and gas firms to develop abandoned fields that still have reserves, the country’s upstream oil and gas regulator will ease procedures for securing exploration permits.

BPMigas chairman Priyono said the move was necessary to help support the country’s efforts to boost oil and gas exploration, and in particular help increase oil production, which has been on the decline over the past five years.

Priyono said in an interview Tuesday the new exploration permits would not require delineation wells or demand development plans (PODs) be submitted.

“We don’t need those kinds of requirements for abandoned fields as the previous contractors will have already fulfilled them, and our main focus is to increase oil production, pronto,” Priyono said.

Abandoned fields are those left idle by previous contractors for various reasons, including production inadequacy.

To become eligible for an exploration permit under the current regulation, new contractors must drill wells to ascertain the field’s reserves, and then submit PODs and budget plans.

Priyono said the process handicapped the country in its bid to meet this year’s oil production target of 977,000 barrels per day (bpd).

However, he said the agency would consult with the Energy and Mineral Resources Ministry before implementing the revision.

He said two companies, Sumatra Persada and Malaysian-based oil firm Genting Oil, were requesting permits to develop two fields, each estimated to be able to produce 4,000 bpd.

BPMigas data shows the country’s average oil production for the first four months of the year reached 976,825 bpd, slightly below this year’s target.

BPMigas said it was confident of meeting the target as 10 new oil blocks were expected to come onstream this year with a combined additional output of 9,300 bpd.

Source: Manila Standard Today, 14 May 2008

Petron Corp. yesterday said it will not deviate from its business strategy and will focus on growth initiatives following the decision of Philippine National Oil Co. to approve the sale of the 40 percent stake held by Aramco Overseas Co. to the Ashmore Group.

“Petron is a strong stand-alone company with solid fundamentals. We have undisputed industry leadership in the Philippines with the largest distribution and marketing network and world-class products and services. That will not change with the new share ownership structure,” Petron chairman and chief executive Nicasio Alcantara said.

“With PNOC’s decision, we will continue to move forward with initiatives that will enable Petron to achieve even higher growth,” he added.

PNOC on Monday said it would not exercise its right of first offer for the Aramco shares, citing the government’s privatization policy and the state’s more pressing priorities such as food security and essential infrastructure projects.

Ashmore is a global asset management company listed on the London Stock Exchange with assets totaling some $36.5 billion. Ashmore offered to buy Saudi Aramco’s 40 percent shares for $550 million. The sale is expected be concluded in August.

Ashmore has committed to invest additional capital in Petron.

Petron recently commissioned the country’s first petrochemical feedstock units, namely the Petro Fluidized Catalytic Cracker and Propylene Recovery Unit, as part of its long-term diversification strategy.

The petrochem facilities allow the Petron refinery to convert black products into high-value fuels such as diesel and gasoline, as well as produce the petrochemical feedstock propylene. A Benzene-Toluene-Xylene unit, currently under construction, will produce additional petrochemical feedstocks.

“While our partnership with AOC is changing, it is not ending. We will retain our strong commercial ties with Aramco since our crude oil supply arrangement remains in place,” Alcantara said.

He reiterated that Ashmore’s intention to buy Aramco’s shares was a strong vote of confidence in the company’s operations and growth prospects, and the Philippines as an investment destination.

“We look forward to working with Ashmore representatives so we can immediately look at synergies that can enhance Petron’s business, especially in the petrochemical sector. In this regard, we see unique opportunities in Ashmore’s wide network of global business relationships,” Alcantara said.

Ashmore is a leading investor in emerging markets, focusing exclusively on developing economies. It has been a long-time investor in the Philippines, with holdings in power-generation, telecommunications, and utilities.

Petron is the largest oil refining and marketing company in the Philippines. Its 180,000 barrel-per-day oil refinery produces a full range of petroleum products to supply nearly 40 percent of the country’s total fuel requirements. It owns more than 1,250 service stations nationwide.

Source: Bangkok Post, 14 May 2008

PTT Plc, the country’s largest oil and gas company, will increase its investment budget by 20% to 943.39 billion baht in order to take advantage of the stronger baht against the US dollar.

The budget is for the group’s five-year investment plan from 2008 to 2012, said Prasert Bunsumpun, the president and chief executive of the majority state-owned company.

Because of the weakness of the dollar, the company sees an opportunity to expand abroad at lower cost, Mr Prasert told the Euromoney forum yesterday.

He said in the appreciation of the baht would especially help its affiliate, PTT Exploration and Production (PTTEP) to expand more aggressively in new project in petroleum-rich countries.

As well, its petrochemical affiliates, PTT Chemical and PTT Aromatics, would receive bigger budgets to secure feedstocks through investments in oil and gas producing nations.

Of the total budget, 286.9 billion baht would be allotted for PTTEP, while the chemical units would have 182.72 billion baht. PTT itself would invest 227.57 billion baht, including 158.65 billion for its oil refinery business and 87.55 billion baht for other activities.

Despite the increase in rising investment capital and the healthy outlook for expansion abroad, Mr Prasert said that at home PTT continued to face the burden of subsidising fuel costs for consumers.

He said that keeping a lid on retail prices had cost PTT, the largest listed company on the Stock Exchange of Thailand, 30 billion baht so far this year, including 20 billion baht from liquefied petroleum gas, 4.5 billion from natural gas for vehicles and five billion baht subsidising gasoline for motorists.

At the same forum, Kurujit Nakornthap, the deputy permanent secretary of the Energy Ministry, said Thailand had the potential to be a major regional petroleum depot due to surplus refined oil capacity of 200,000 to 250,000 barrels per day.

The excess capacity is due mainly to Thailand’s policy to support alternative fuels, resulting in a drop in in refined-oil consumption in the domestic market to between 650,000 and 700,000 barrels a day from nearly 900,000 in previous years.

Meanwhile, alternative fuels also had potential to be significant export products due to Thailand’s ethanol surplus, he said.

In a bid to achieve its goal, the government has revived the Southern Economic Landbridge proposal, which has been considered on and off for 20 years. It is now conducting a feasibility study for the project, suspended after the 2004 tsunami.Energy policy planners would ask the government for strong support for the project, he said, as Thailand needed to expand oil refineries to other areas away from the congested Eastern Seaboard.

The investment cost for the southern project would clearly be much higher than the US$719 million estimated in a 2004 study, given higher construction materials costs.

The project would include a 42- inch-diameter petroleum pipeline from Nakhon Si Thammarat on the Gulf of Thailand to Phangnga on the Andaman Sea. The 240-km pipeline would have capacity of five million barrels of petroleum per year.