UK’s Andalas Energy Looking Indonesian Asset

Photo: Andalas Energy

JAKARTA (TheInsiderStories) – United Kingdom’s Andalas Energy and Power PLC (LON:ADL) looking the potential purchase of an interest in an oil and gas asset in Indonesia, said the company in a statement on June 15. One of the oil & gas assets the company looking for is  the Bunga Mas PSC.

Bunga Mas PSC is an oil and gas discovery located within the Southern Palembang sub-basin and is adjacent to a number of producing assets, including Pilona. The project was granted in October 2005 with a contract area of approximately 448 kilometers.

In the area, fourteen prospects and leads have been identified within producing Air Benakat, Batu Raja and Talang Akar formations, four of which have prospective resources. The company also believe that deeper Batu Raja and Talang Akar formations are under-explored and offer attractive targets.

Last year, Andalas has finalized the placing of the company’s shares to the new and existing shareholders, which enables the company to raise £500,000 of fresh funds. The placing was led by 1798 Volantis Fund Ltd who has subscribed for a total of 1.28 billion units of shares, equating to 21.33 per cent of of the enlarged share capital of the company.
In addition, Volantis has provided the company with a flexible convertible loan note facility for up to £2,000,000 (subscription price £1,800,000) to provide access to follow-on capital that will be required to develop at least one of its projects through to final investment decision.
“The funds raised in the placing enable the Company to advance each of its projects,” Simon Gorringe, Chief Executive of Andalas Energy & Power, said at that time.
It is expected that, taken together the proceeds from the equity subscription alongside the convertible loan note would, if drawn down, provide the capital to fund the company through to the first projects final investment decision, which is the precursor to construction.
The proceeds of the placing will be used to provide additional working capital and project development capital to advance Andalas’ portfolio of wellhead IPP projects. An application has been made to the London Stock Exchange for admission of the Placing Shares to trading on AIM, the company said.
The placing of shares was made after the company signed a memorandum of understanding with PT Pertamina Power Indonesia, a subsidiary of state-owned energy company PT Pertamina and Siemens AG for development of a well-head power plant with installed capacity of 20-50 MW in the Puspa Field.
The Puspa gas field is operated by PT Pertamina EP, an upstream oil and gas subsidiary of Pertamina. The MoU provides the basis to negotiate further on the project arrangements as well as other related issues.
Andalas said it will make a final investment decision after the project has been included in the power plants business planning of the state electricity company Perusahaan Listrik Negara.
According to McKinsey, Indonesia’s oil and gas industry is a vital part of the economy, contributing approximately 5 per cent. of total state income tax revenues in 2015 and the country remains the world’s eighth largest exporter of natural gas, in the form of Liquefied Natural Gas.
By 2020, the domestic gas demand to grow ten-fold while international gas market worth up to US$10 billion. In 2030, Indonesia will become the world’s seventh largest economy with 135 million consumers, the upstream energy market generating a turnover of $270 billion and 47 percent of primary energy demand met by oil and gas.
Photo by Andalas Energy

While, Sumatra is the engine room of the Indonesian oil and gas industry, with approximately 50 p of the country’s oil and gas opportunities and in excess of 70 oil companies operating in the region, including the national oil company, Pertamina, CNOOC, ConocoPhillips, Petrochina, Chevron, and Exxon Mobil.

Despite this, government fuel subsidies, along with a drop in local production, devaluation of the country’s currency, and the declining oil price have placed an ever-growing burden on the country’s budget. This has created increasing pressure on the government to streamline processes and approvals and encourage increases in upstream oil and gas investment, representing a significant opportunity to technically capable companies such as Andalas.
With a population of over 250 million, vast areas of the country facing critical energy shortages and demand set to increase by over 30 percent by 2020, Indonesia presents an attractive opportunity.