Chevron May Pump Gas From Indonesia's Deep Sea Areas By 2016

By Leony Aurora

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, said Steve Green, head Chevron's Indonesian and Philippine operations. 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. State- run oil company PT Pertamina 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.

``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 in Jakarta. ``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.

Regulatory Approval

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 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.

Chevron owns 80 percent stake in Ganal area and Eni SpA holds the rest.

The cost of LNG imports by Asian buyers have doubled in the last three years as the price of crude surged. Oil has more than doubled in a year to $130.25 a barrel on the New York Mercantile Exchange today.

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.

`Unique Timing'

``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.

To contact the reporter on this story: Leony Aurora in Jakarta at laurora@bloomberg.net

Greenspan Says Oil to Keep Rising on Capacity Limits

May 14 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said oil prices will keep rising as energy companies have invested too little in production and infrastructure to cope with higher demand.

Companies haven't been reinvesting enough to keep supply growing in line with demand, Greenspan said via satellite to a conference sponsored by Deutsche Bank AG in Singapore, according to an investment strategist who attended the event and who spoke on the condition of anonymity.

Increasing futures-market activity is expanding the aggregate demand for oil because more needs to be held in storage to meet contracts, Greenspan said, according to the person who attended the event.

``There's evidence that fundamentals are pointing to higher prices,'' said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd. in Hong Kong. ``Even as demand and supply are in balance, the risks to supply and oil's attraction as an inflation hedge are pulling it higher.''

Crude oil rose to a record $126.98 a barrel in New York yesterday on concern U.S. refiners may fail to meet demand for fuels such as diesel and heating oil. Supplies of distillates in developed countries fell 6.7 percent to 477.6 million barrels in March from a year earlier, according to International Energy Agency estimates.

Inflationary Pressures

Crude oil for June delivery was at $125.99 a barrel at 11:53 a.m. Singapore time in after-hours electronic trading on the New York Mercantile Exchange.

Higher prices of energy and raw materials are fanning inflation around the world, even as economic growth slows. Fed officials yesterday said they're concerned about rising prices, reinforcing traders' expectations that the central bank's next move will be to raise borrowing costs rather than lower them.

San Francisco Fed President Janet Yellen said the central bank can't be ``complacent about inflation,'' and Cleveland Fed President Sandra Pianalto said prices are rising ``somewhat faster than I would prefer.''

``If Greenspan is correct that prices will rise, then inflationary pressures would set in,'' said CFC Seymour's Kowalczyk. ``That would prompt the Fed to act to tighten lending.''

Greenspan reiterated comments made last week that the worst of the credit crisis will pass once investors fully anticipate the likely losses on securities tied to subprime and other mortgages, where defaults have surged.

Subprime Losses

He said investors are still guessing at the extent of subprime losses, which can't be ascertained until house prices stop declining, according to the person.

This week's U.S. retail sales figures mean the U.S. economy is showing flexibility and resilience, though the depressing effects of the subprime crisis will filter through into other data, he said. Retail sales excluding cars rose 0.5 percent in April, more than twice economists' forecast.

Greenspan said efforts by China to suppress the value of the yuan aren't in the country's long-term interests, adding that the government needs to open its capital account, according to the person who attended the Singapore event.

The yuan has climbed 0.2 percent against the dollar since the start of April after appreciating 4.2 percent in the first quarter.

Greenspan, 82, served as Fed chairman from August 1987 to January 2006. Since then, he has given regular speeches, written a bestselling book and begun advising clients including Deutsche Bank. The paperback version of ``The Age of Turbulence,'' including a new chapter on the credit crisis, is scheduled for publication in August.