US oil major ExxonMobil has picked South Korea's Samsung and Italian construction company Saipem to carry out engineering, procurement and construction work on the Cepu block in East Java, Indonesia, a senior official at Indonesia's upstream regulator, BPMigas, said Tuesday.
The contracts are expected to be inked early May, BPMigas vice chairman Hardiono told Platts.
ExxonMobil could not be reached for comment.
According to Hardiono, Samsung and Saipem will be awarded two of five EPC contracts for the Cepu project. The remaining three contracts will be awarded by May, he said, adding that work on all the contracts should begin by the end of May and be completed by December 2013.
The Samsung-led consortium, which also includes Indonesia's Tripatra Engineering, will be awarded a $750 million contract to build key facilities such as storage tanks and a compressor unit. The Saipem-led consortium will be awarded a $114 million contract to build a pipeline linking the Banyu Urip oil discovery in the block to the northern coast of East Java, and a single buoy mooring facility.
The Cepu oil project took a long time to get off the ground because of protracted negotiations between Indonesia's state-owned Pertamina and ExxonMobil over issues like equity split and operatorship of the block.
The two signed a production sharing contract in September 2005, four years after the block's surprise major oil discovery at Banyu Urip in 2001. Pertamina and ExxonMobil took a 45% stake each in the block, with the local governments sharing the remaining 10% equity.
However, the project has had a rocky start, unable to maximize the 20,000 b/d design capacity of the initial production facilities since it came on stream in December 2008, because of technical problems and issues with evacuating the crude.
Cepu produced an average 18,500 b/d in 2010, according to figures from Indonesia's upstream regulator BPMigas.
The Cepu oil project is estimated to produce 165,000 b/d of crude oil at its peak, according to estimates by ExxonMobil, but this hinges on the award of the EPC contracts to build the necessary infrastructure at the block.
The EPC contracts are for field production and processing facilities, onshore and offshore oil pipelines to the northern coast of East Java, a single buoy mooring facility, and a floating storage and offloading vessel.
ExxonMobil and Pertamina were earlier expected to have awarded the contracts by January this year.
The Cepu block is estimated to contain about 600 million barrels of oil and 1.7 Tcf of gas. Banyu Urip is estimated to contain more than 250 million barrels of oil.
ExxonMobil said Monday that a second oil discovery, named Kedung Keris, was made at the block. The Kedung Keris-1 discovery well was drilled on land to a total depth of 7,032 feet (2,143 meters). The well, which is located approximately 9 miles (14 kilometers) from Banyu Urip, encountered an oil column of 561 feet in the target carbonate zone, it added.
The Kedung Keris-1 well data will be analyzed over the coming months to evaluate the full resource potential of the reservoir, the company said.
