Betting on $100 oil, Indonesia driller aims to triple output

Monday, September 23, 2019 7:20 AM: CDT

The dominance of oil as an energy source can be weakened, but one Indonesian producer is convinced that there will still be many opportunities as the era of hydrocarbons enters the final act.

PT Medco Energi Internasional aims to increase oil and gas production from 120,000 barrels of oil per day to 300,000 barrels per day for the next five to ten years, according to Hilmi Panigo. He said in an interview in Jakarta that explorers who already have fields in Libya, Mexico in Indonesia are most interested in buying existing land wells.

Medco's strategy is based on Panigoro's view that the lack of exploration and strong aviation and petrochemical demands will raise crude oil prices to over $ 100 a barrel in about a decade. This is contrary to the perspective of petroleum majors such as BP Plc in recent years. Recently, some resources said they would not see light today because of investor pressure on low prices and low-carbon projects.

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Panigoro expects crude oil prices to remain at around $ 60 a barrel in the short term, but "in the long run, it's going to be a different story because there isn't enough investment upstream to replace production declines," Panigoro said. Even if fossil fuels use ebb when the electric car takes off, there will be a lack of oil, he said.

Medco, which owns copper and gold mines and gas-fired power plants in Indonesia, began buying this year with the purchase of Ophir Energy Plc for 415 million pounds (550 million pounds). O'Fir has oil and gas assets in Indonesia, Thailand and Vietnam, and the acquisition will add about 25,000 barrels of oil per day to Medco's 2019 output.

Wood Mackenzie Ltd. can purchase $ 46 billion in oil and gas assets in Australia and Southeast Asia, seeking to resell its production sector in its major field and rebalance its portfolio to high-growth regions in the United States and Latin America. Said in a note this year. According to Energy Consulting, Southeast Asian oil companies may want to sell a small stake in large projects such as Rokan Block in PT Pertamina.

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Jakarta analyst Juan Oktavianus said PT Panin Sekuritas maintains a purchase rating for Medco. He said the purchase of Ophir was positive for the company's financial performance and that the sale of some of its subsidiaries gave it more opportunities for acquisition.

Medco favors land assets over deep-sea projects because of the enormous capital investment required in the maritime sector, said Panigoro, a graduate of the Colorado Mining University. Medco will be "opportunity-driven" and will consider assets with production costs of less than $ 10 a barrel, he said.

Panigoro said, “There will always be money in the right assets. "In addition to being well suited to business, we will ensure that the debt ratio does not exceed 3."

With the help of Dan Murtaugh.

© 2019 Bloomberg L.P.


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