September 25, 2007 12:00am
SANTOS has started first oil production from the $150 million Oyong project in Indonesia, more than 12 months later than anticipated.
Oyong, which is located offshore East Java, has been dogged by delays and a 30 per cent development cost overrun from the initial estimate, with first oil production initially slated for early 2006.
The project also suffered a cut in oil reserves after drilling revealed the field had a complex structure.
Oyong is expected to produce between 8000 and 10,000 barrels of oil per day.
"First oil production from Oyong is an important milestone for Santos as it adds another operated project to our Asian portfolio," Santos managing director John Ellice-Flint said.
Meanwhile, Santos said front-end engineering design for development of the Oyong gas reserves had started with a final investment decision expected before the end of 2007.
The total cost for the combined oil and gas development is estimated at $US130 million ($A150.23 million).
A sales agreement has been signed with PT Indonesia Power, with gas to be piped to an onshore processing facility adjacent to the Grati power station in East Java.
First gas production is expected in the first half of 2009.
Santos said the Wortel gas field located about 7 km west of Oyong could be potentially incorporated into the gas development.
The Wortel field was discovered last year, with further work planned for the first half of 2008.
The Oyong project is a joint venture between Santos, Singapore Petroleum Sampang and Cue Sampang.
Santos is the operator and majority stakeholder in the project.
The oil and gas producer's shares added 19 to $14.51.