Oil and gas mining company PT Medco Energi Internasional Tbk has prepared US$150 million in capital expenditure (Capex) to develop the South Natuna Sea Block B Production Sharing Contract (PSC).
Medco is a publicly-listed Indonesian energy company focusing on the exploration and production of oil & gas, which was established in 1980 as Meta Epsi Pribumi Drilling Company (MEDCO). The company also operates in Trading and Holding & Related Operations, Explorations and Production of Oil & Gas, Power, Services, Chemicals and Rental of properties.
New Capex
Medco Vice President of Corporate Planning & Investor Relations Myrta Sri Utami said the company has allocated the US$150 million Capex, or IDR 2.34 trillion, for several new project developments in South Natuna Sea Block PSC.
This year’s Capex is valued at US$300 million, with the oil & gas sector at about US$250 million and US$50 million for electricity. As of the Q3 2022, Medco’s realized Capex reached US$174 million or 58% of the total budget this year. The absorption is from the Natuna gas development project and the completion of the Riau Combined Cycle Gas Turbine Plant (PLTGU) project and the Sumbawa Solar Power Plant (PLTS) facility.
“The Shark Field has operated since June and the Belida Extension project is hoped to secure its first gas streams by the end of the year,” Medco CEO Roberto Lorato said in a press statement on December 1, 2022.
Achievements
Medco has seen a lucrative outcome this year. In the third quarter of 2022, its production rate for oil and gas reached 161 million barrels of oil equivalents per day (mboepd), or a 73% increase compared to last year of the same period. Its production cost is at US$7.2 per boe.
Based on the company’s financial report on the Indonesia Stock Exchange, as of September 2022 Medco earned revenues of US$1.80 billion, or a 89.11% increase from the same period in 2021 of US$955.92 million.
The largest revenue came from oil and gas sales contracts amounting to US$1.71 billion. Meanwhile, the company also recorded electricity sales contracts worth US$24.15 million, shipping operations and services contracts of US$20.19 million, construction contracts of US$12.371 million, and other service sales contracts worth US$7.39 million.
Medco earned net profit of US$400.92 million in the nine months of 2022, a 614.39% increase from 2021’s profit of US$56.12 million.
The company has also finished several projects such as the Riau PLTGU with a capacity of 275 MW, which began operating in February 2022, and the Sumbawa PLTS PV with a capacity of 26 MWp, which has been operational since June 2022.
Medco has signed a Gas Purchase Agreement (GSA) with the Gas Supply Pte.Ltd. (GSPL) to continue gas supply from PSC Corridor, South Sumatra.
Risks in oil & gas and electricity sector
According to Center of Risk Management and Sustainability (CRMS), there are five risks affecting oil and gas investment in Indonesia. The five risks are:
- Political situation: Government regulations governing companies, especially foreign investors;
- Geology: The difficulty of extraction and the possibility of results that are smaller than expected;
- Price: Oil and gas prices are the main factors to determine whether an oil and gas investment is economically feasible or not;
- Supply and demand: Unstable oil and gas prices and other economic factors such as the financial crisis also have an impact on the supply and demand for oil and gas;
- Financing: The heavier the regulations and exploration costs, the more expensive the operational costs that must be borne by the company.
Meanwhile, the Indonesian Forum for the Environment (Walhi) has highlighted environmental destructions due to the oil and gas explorations. The NGO mentioned East Nusa Tenggara and West Nusa Tenggara provinces as the most affected by the explorations in the past decade.
