May 29 (Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, may start pumping natural gas from Indonesia's deep-sea areas by 2016, boosting exports as Asian buyers pay near-record prices for the cleaner-burning fuel.
Fields in the Ganal block off Borneo island could produce ``close to'' 1 billion cubic feet a day at their peak, Steve Green, head Chevron's Indonesian and Philippine operations, said in Jakarta. That's 13 percent of current output in Indonesia, the world's third-largest liquefied natural gas exporter.
The project would more than double Chevron's gas output in Indonesia and boost supply to an LNG plant at Bontang in East Kalimantan province, helping stem a decline in exports. LNG import costs for Asian buyers have doubled in the last three years as the price of crude oil more than tripled, reaching a record $135.09 a barrel on May 22.
Drilling in waters like that is very high-tech. The machines that can do that are very expensive,'' John Vautrain, Singapore-based vice president at consultants Purvin & Gertz Inc., said by telephone.Gas even now is relatively low priced versus crude. This is favorable for this kind of drilling.''
PT Pertamina, Indonesia's state-run oil company, estimates LNG shipments to a group of Japanese utilities, known as Western buyers, will fall by 75 percent to 3 million tons a year after current contracts expire by March 2011 as output from some existing fields drop.
`High Interest'
There's a very high interest by Japanese, Korean and other new LNG buyers around the world,'' Green, managing director of Chevron IndoAsia Business Unit, said in an interview at his office.It's a great opportunity for Indonesia to develop the project. That's why Chevron is interested.''
Chevron produced 606 million cubic feet a day in Indonesia last year, including output from areas that it doesn't operate, according to its annual report. The company's share of gas production in Indonesia was 277 million cubic feet a day, or 5.5 percent of its global output.
Chevron is awaiting approval from Indonesia's oil and gas regulator BPMigas for a development plan submitted last year, Green said. Based on preliminary estimates, it will take six to eight years to develop the fields before they can start pumping gas, he said.
The ``multi-billion dollar'' project's cost will be calculated after the development plan is approved, Green said. He declined to give estimates of the gas reserves at the fields, citing company policy.
Project Costs
Chevron will invest $6 billion to develop the Gehem and Gendalo fields off Boreneo, BPMigas said in October 2006.
The oil company owns an 80 percent stake in Ganal area and Eni SpA holds the rest.
Drilling costs have surged as explorers intensify the search for oil and gas after crude prices reach records. The average first-quarter daily rent for deepwater floating rigs operated by Transocean Inc., the world's largest offshore oil driller, jumped 20 percent to $284,100 compared with a year earlier.
Demand for energy is at an all time high,'' Green said.This project enjoys a unique timing in the industry when the market for a project of this magnitude exists.''
Chevron, the biggest crude producer in Indonesia, is also developing a new oil field in Sumatra and investing in existing projects to slow a decline in production, he said.
The company plans to start production at the North Duri field in central Sumatra by end this year, Green said. Chevron may spend $1.3 billion to develop the area, which may produce 65,000 barrels a day at its peak in 2012.
Chevron's concessions in Sumatra, including Minas and Duri areas, pumped 425,000 barrels of oil a day last year, nearly half of Indonesia production.