Indonesia/East Timor: New government could lead to stability

Events just might begin to settle down in the Indonesia/East Timor region soon.

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Events just might begin to settle down in the Indonesia/East Timor region soon. Tensions are still high, but the region has gone through a dramatic change that may result in a positive future. First, the world unanimously welcomed the newest nation - East Timor. Indonesia's top legislative body in Jakarta voted to recognize the independence of the territory, allowing it to become its own and the world's newest nation.

Second, in the same week as the independence vote, Indonesia held its presidential election, an election most hoped would put an end to President B.J. Habibe's tumultuous 17-month reign. Although unpopular, Habibe had a great deal of power going into the election and it was common consensus that he would not go down without a fight.

Surprisingly, just before the election, Habibe pulled his faltering campaign and withdrew from the race, paving the way for the clear popular successor, Megawati Sukarnoputri, daughter of Indonesian founding president, Sukarno. Just when the future began to clear up, it clouded over again with another surprise. Opponent Abdurrahman Wahid, a blind and sickly Muslim leader, took the vote and was elected to the presidency of the fourth most populous nation.

This election immediately sparked a clash between Wahid and Megawati supporters and riots ensued. Calm was achieved when Megawati was appointed Vice President. Her supporters were sated. With these two popular leaders in place, Wahid with the 40 million plus Muslim support, and Megawati, the leader of the now impoverished lower middle classes, the future looks bright again.

Of greatest concern to the oil industry in Asia is the future of the Zone of Cooperation Area, between East Timor and Australia, and the subsequent Timor Gap Treaty. With Indonesia out of the picture, East Timor now takes a share of the area's governance. Talks are underway between the two governments. Indonesia will withdraw from the treaty shortly and is expected to be cooperative through the transition. While no official word is out on the changes, the Australian government said that some adjustments will have to be made with respect to the joint authority. All signs have been promising from the East Timorese. Regardless, oil companies, such as Phillips, have said that they will continue to do business as usual under the terms of the treaty.

Philippines: Texaco joins Malampaya

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The Malampaya development plan, which will be used supply power generation plants on Luzon Island for 22 years.
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Texaco has signed on for a 45% stake in Shell's $2 billion Malampaya Deepwater Natural Gas Project offshore the Philippines. The Malampaya gas project is the largest industrial project in the history of the Philippines. The field is located northwest of Palawan Island and estimated to produce over 3 Tcf of gas and 120 million bbl of condensate over its 20-year life.

Malampaya is an integrated gas-to-power project, designed to supply gas to three new gas turbine plants on Luzon Island, of which Shell and Texaco have no equity. The two companies will be chiefly involved in the production of the gas. This will include the installation and operation of deepwater gas wells, the onshore and offshore production facilities, and a 500-km pipeline.

Delivery of first gas is expected by year-end 2001 with production reaching 360 MMcf/d of gas by 2002. Shell will remain as operator and the transaction is subject to government approval. Shell originally signed commercial agreements for the project last year. Texaco said that its interest in the project will add 140 million boe to its proved reserve base and increase the company's international reserves by 30% by year-end.

Indonesia: First deepwater development green-lighted

Approval has been granted for the first deepwater development offshore Indonesia. Following Unocal's earlier commercial declaration for the Makassar Strait production sharing license, state-run Pertamina has granted approval for development activities to begin on the West Seno and Merah Besar fields in the deepwater Kutei Basin offshore East Kalimantan.

The total development plan calls for two phases and will use multiple mini-TLPs with a tender-assisted rig producing to a floating production unit. The first phase will feature 24 development wells completed from the first wellhead TLP and is expected to begin production in 2002. Phase two will then follow in 18 months and will include a second TLP and 21 development wells. Oil and gas will be transported to shore through separate pipelines to the Santan Terminal. Unocal estimates production at rates of about 60,000 b/d of oil and 150 MMcf/d of gas.

The approval for development was given just over one year from the discovery of the West Seno Field. Unocal operates with 50% interest with partner Mobil holding the remaining 50%.

ZOCA: First phase of Bayu-Undan approved

The Bayu-Undan gas condensate project has taken another significant step. The project partners have approved the first phase of the project's development plan. The first phase of the project entails the gas recycle development and is estimated to cost $1.4 billion. The gas recycle project will involve producing and processing natural gas, separating and exporting condensate and liquefied petroleum gas liquids, and re-injecting lean gas into the reservoir. The lean gas also is being planned for export as part of a future phase of the project. With this approval, the partners expect first production by late 2003 or early 2004.

Bayu-Undan lies in Area A of the Timor Gap Zone of Cooperation Area between Australia and East Timor. With regard to the political changes in East Timor, the partners said that they have had substantive and encouraging discussions with all relevant parties and will continue to operate under and proceed with development according to the Timor Gap Treaty.

Australia's government praised the approval of the project. Minister for Industry, Science, and Resources, Senator Nick Minchin said, "This is an important demonstration of industry confidence in the Timor Gap Treaty and its continuing effectiveness in the transition to an independent East Timor."

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