Meanwhile, the decline in oil and gas production at the beginning of this year was due to the reduction in Medco's participation rights in the Corridor Block after the extension of the production sharing contract (PSC) in December 2023 had become effective for the next 20 years.

On the other hand, Medco said, demand for piped gas tends to be lower in Singapore, which also corrected the company's oil and gas lifting earlier this year. However, the decline in production was partially offset by higher oil volumes from Oman 60 and Natuna.

Medco CEO Roberto Lorato positively assessed the company's operational and financial performance which was considered solid in the first quarter of this year. Moreover, said Roberto, world crude oil prices have recently started to improve.

"We are pleased to report solid operational and financial results for the first quarter of 2024," Roberto said in a press statement on Thursday, May 2, 2024.

Meanwhile, the average realized price of oil is around US$79 per barrel, higher than the first quarter of 2023 at US$76.4 per barrel, and the average gas price is US$7 per MMbtu. Capital expenditure of U$99 million, mostly used for drilling in Oman, new development in Natuna (Forel and West Belut) Corridor (Suban), and the Ijen Geothermal project.

“With higher oil production volumes and improved production guidance, we are at the right time where oil price conditions are improving. This indicates a positive outlook for the remainder of this year," Roberto said.

Meanwhile, Medco recorded cash and cash equivalents of US$478 million with net debt of US$2.5 billion and net debt to Earning Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of 1.9 times.

"We continue to review MedcoEnergi's portfolio and look for new opportunities to create added value. The successful completion of the Vietnam divestment and the profitable acquisition of Oman have placed MedcoEnergi in a good position to achieve sustainable success," Medco President Director Hilmi Panigoro said.

As previously reported, the Corridor Block production sharing contract has been extended for 20 years, effective from December 20, 2023 to 2043. Through this contract extension, an amendment to the production sharing contract was approved to move back to cost recovery.

Before renewal with an effective contract, Medco holds 54 percent participation rights or PI following the acquisition of ConocoPhillips Indonesia Holding Ltd's share with a transaction reaching US$1.35 billion in early January 2021. Furthermore, the respective PIs are held in minority by Talisman Corridor Ltd. (Repsol) at 36 percent and Pertamina Hulu Energi Corridor at 10 percent.

Meanwhile, after the contract extension became effective at the end of last year, the composition of PI holders changed drastically. Currently, Medco holds 46 percent, PHE Corridor 30 percent, and Repsol 24 percent. Furthermore, Pertamina will become the operator of the Corridor Block in 2026 or 3 years after the contract runs on that block.

Management by Pertamina is considered strategic to integrate their assets in the Rokan Block and the Dumai Refinery in Riau. The estimated investment value from implementing the definite work commitment (KKP) for the first 5 years is US$ 25 million and the signature bonus is US$ 250 million. Based on current data, the Corridor Block has an area of 2,095.25 square kilometers, most of which is in South Sumatra Province.

Pertamina also has four active work areas in the South Sumatra area, namely Pertamina EP Asset 1, PHE Jambi Merang, PHE Ogan Komering, and PHE Raja Tempirai.

As previously reported, Director General of Oil and Gas at the Ministry of Energy and Mineral Resources (ESDM), Tutuka Ariadji, said that the production trend from the Grissik Field, Corridor Block, has recently decreased. On the other hand, production costs have continued to increase in recent years.

Tutuka said the ESDM ministry facilitated MEDC to move to a cost recovery scheme. Nevertheless, he asked Medco to increase production trends which had recently begun to decline.

"This is a field whose production has decreased and then requires additional efforts in its production," he said.

Based on data at the Directorate General of Oil and Gas, the average annual production year-to-date since December 14, 2023 from the Corridor Block is 809 million standard cubic feet per day (MMscfd) of gas and 5,491 barrels of oil per day (bopd).