Subject: ConocoPhillips to exit oilfield in Timor Sea

Upstream May 25, 2007

ConocoPhillips to exit oilfield in Timor Sea

RUSSELL SEARANCKE

Replacement operator needed as US company leaves Elang-Kakatua

ConocoPhillips is preparing to exit the ageing Elang-Kakatua oilfields in the Timor Sea's joint petroleum development area, and the local authorities are seeking a replacement operator to continue production.

Oil production from Elang-Kakatua was 184,000 barrels, or 2000 barrels per day of oil in the three months ended 31 March, according to joint venturer Santos.

ConocoPhillips has given notice to the Timor Sea Designated Authority (TSDA) that it wishes to cease production at Elang-Kakatua on 27 June, and the TSDA has granted the US operator until 27 July to adequately prepare the fields for any subsequent work.

The TSDA is the joint East Timor-Australia regulator for the joint petroleum development area that hosts just two producing projects - Elang-Kakatua and the big Bayu-Undan gas and condensate field, also operated by ConocoPhillips. The TSDA has given its approval for all wells at Elang-Kakatua to be suspended for a limited time while it receives expressions of interest from "companies interested in reviewing this mature asset, which may have redevelopment and enhanced recovery potential", said the Dili-based organisation.

The deadline for expressions of interest is 1 June and already more than a dozen companies have sent submissions to the TSDA, said sources. Cumulative production from the project since start-up in July 1998 through to February 2007 was just over 31 million barrels of light, low sulphur oil from an initial reserve of 33 million barrels.

Oil produced is 57 degrees API and associated gas in the production stream has been used for fuel on the leased floating production, storage and offloading vessel Modec Venture 1.

The TSDA estimates that oil output in 2007 will be 767,000 barrels of oil and natural gas liquids plus associated gas, while in 2008 it forecasts liquids production to be 620,000 barrels of oil and liquids. Joint venture partners in joint petroleum development area 03-12 are operator ConocoPhillips (57.36%), Santos (21.43%) and Inpex (21.21%).

Sources said the TSDA was very eager for another company to take up the reins given the estimated remaining reserves.

There was speculation that ConocoPhillips' rationale for closing down at Elang-Kakatua was based on shrinking profit margins.

Even though the project's production facilities, including the FPSO and subsea equipment are in good operating order, they are getting older and more fragile, said sources.

In addition, a reduction in the amount of produced gas means the FPSO is running off more expensive fuels.

It is understood that ConocoPhillips has already given Modec three months' notice of its intention to stop production at Elang-Kakatua.

A spokesperson for the Japanese floater giant said there were a number of contingencies being examined for its FPSO, but "as of today, the FPSO is operating under the charter contract with ConocoPhillips".

The floater has production capacity of 35,000 bpd of oil and storage space for 750,000 barrels of oil.

------------------------------------------ Joyo Indonesia News Service


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