Pertamina and PetroChina Form Upstream Joint Venture

Pertamina and PetroChina are forming an upstream joint venture that will make Indonesia China's largest energy supplier in Asia by 2005. The two countries are in a position to compliment each other, with China eager to seek overseas oil and gas reserves, while Indonesia needs cash to develop its readily available energy resources. The agreement was signed Sunday during Indonesian President Megawati Sukarnoputri's visit to China. The two countries have also agreed to establish a joint energy forum.

The partnership between Pertamina and PetroChina comes as Chinese oil companies are aggressively seeking opportunities to explore and produce oil and gas overseas to make up for the domestic supply deficit. The partnership will lead to onshore and offshore oil and gas exploration and development in Indonesia which will likely cost over US $100 million.

In addition to direct investment in Indonesia's upstream E&P projects through production sharing contracts, PetroChina plans to provide Indonesia with enhanced oil recovery technology. In 1992 China invested in Indonesia's oil sector when CNOOC purchased a 39.51% stake in the Malacca field in Indonesia. The latest acquisition was CNOOC Ltd.'s purchase of five oil and gas projects from Repsol YPF S.A. in Indonesia in January.

This agreement will pave the way for Pertamina to supply China with LNG by 2005. A CNOOC-led consortium has short listed Indonesia as one of one of the three potential supply sources for its 3-million-metric-tons-a-year Guangdong LNG project. Australia and Qatar are the other interested parties. Pertamina and its PSC partner BP Indonesia will start developing the Tangguh gas field in July, an indication of its confidence in being awarded the contract, which is worth as much as US $500 million a year.