Kulim moves up oil and gas value chain in Indonesia

PETALING JAYA: Kulim (Malaysia) Bhd is moving up the oil and gas (O&G) value chain with a joint operating agreement (JOA) signed with long time Indonesian plantation partner, PT Graha Sumber Berkah (GSB) to co-operate on the South West Bukit Barisan Block (SWBB) production sharing contract (PSC) in Central Sumatera.
Kulim is currently already in the transportation of clean petroleum products and fabrication of O&G pipelines.
The tripartite JOA involving Kulim's wholly-owned subsidiary, Kulim Energy Nusantara Sdn Bhd (KENSB), GSB and PT Radiant Bukit Barisan E&P (RBB) as operator of the PSC, allows Kulim to leverage on its Indonesian partner to tap into fresh investment opportunities in Indonesia.
Under the agreement, RBB shall remain as the main operator while GSB and Kulim Energy will participate to become the co-operator of the SWBB Block.
RBB is a Jakarta-based company involved in the exploration and development of O&G fields in the SWBB Block, with an exploration area of 779 sq km.
In a filing with Bursa Malaysia yesterday, Kulim said the co-operators are obliged to provide financial, technical and human capital support to the operator to perform its obligations under the SWBB production sharing contract.
The contract was entered into on Oct 13, 2008 between PT RBB, PC (SKR) International Ltd and Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu Minyak & Gas Bumi (SKKMigas).
Kulim said that in keeping up with Indonesian upstream O&G requirements, a work programme and budget (WP&B) has been submitted by PT RBB to SKKMigas and is pending approval.
As part of the WP&B submission, it said the operator is required to carry out the on-going work programme such as geological and geophysical studies, seismic studies and exploration of existing and new wells at the SWBB Block.
It said the total cost for exploration activities from 2015-2018 is estimated at US$53.65 million or RM175.7 million.
"In return for the co-operators support to the operator, it is agreed that Kulim Energy is entitled to 60% of the net profit from the project while the remaining balance shall be for the other parties, subject to provisions in the SWBB product sharing contract and prevailing tax applicable to each party," it said.
Kulim said it shall initially finance its commitment under the agreement using internally generated funds.
It said proceeds from the proposed divestment of its 48.97% subsidiary, New Britain Palm Oil Limited, will be utilised to part finance Kulim's commitment on exploration works within SWBB Block, other potential venture in O&G sector and expansion of oil palm plantation in Indonesia.