South Korea’s POSCO International Corp. is poised to secure rights worth several billion dollars to explore and produce natural gas in Indonesia, marking its fourth gas development project following in operations in Myanmar, Malaysia and Australia.
POSCO said on Tuesday it has signed a memorandum of understanding (MOU) with the Indonesian government and its state oil company PT Pertamina Hulu Energi (PHE) in Tangerang, Java to jointly develop the Bunga gas block off eastern Java Island and share its production.
The gas block measures 8,500 square meters, about 14 times the size of Seoul, with a depth of 50 meters from the shallow sea to the deep sea of 500 meters.
The Bunga gas block is estimated to have some 1.3 billion barrels of natural gas reserves, worth several billion dollars.
At the signing ceremony, POSCO International Chief Executive and Vice Chairman Jeong Tak and Pertamina Hulu Energi CEO Wiko Migantoro attended.
Under the MOU, POSCO will explore the gas block for six years. If it succeeds in extracting gas from the field, it will be allowed to produce natural gas there for a period of 30 years.
POSCO sees a high chance of drilling oil and gas from the gas block because of its geological similarity to the Pagerungan oil field near the Bunga block. The Pagerungan had produced a large volume of natura gas.
A 50:50 consortium between POSCO and PHE must share production from the offshore block with the Indonesian government at a ratio of 40:60 for oil and 45:55 for gas.
A quarter of its production must be used within Indonesia.
Following the news, POSCO International’s share price soared 12.7% to close at 74,400 won ($58), off its record high of 76,700 won touched during the trade. The stock has nearly tripled year-to-date.
The announcement comes a day after POSCO International posted its strongest-ever quarterly profit of 357.2 billion won in the April-June period.
POSCO operates complex power plants
The POSCO-PHE consortium performed feasibility studies on the Bunga block from 2021. They found a layer of rock that is expected to hold oil and gas reserves.
They will evaluate the potential of the block through 3D seismic investigations, before making a decision in 2027 on whether or not to drill the block.
Other than Indonesia, POSCO operates gas fields in Myanmar, Malaysia and Australia for natural gas production.
Last year, it acquired Australia’s Senex Energy to develop onshore oil fields.
Including the Bunga gas exploration project, POSCO will spend a combined 1.3 trillion won ($1 billion) in overseas oil and gas exploration projects by 2025.
(Courtesy of Senex) POSCO hopes the new Indonesian project would repeat its successful oil field development in Myanmar, based off the coast of Rakhine State. The Shwe natural gas project in Myanmar accounted for 30% of its operating profits in the second quarter of this year.
The natural gas produced abroad will be used for POSCO’s LNG bunkering, a business of providing LNG to power ships, instead of pollutant fossil fuels, as well as to operate LNG complex power plants.
POSCO International plans to invest 1.6 trillion won to build its LNG infrastructure facilities and another 700 billion won in LNG complex plants.
POSCO and PHE also signed a separate MOU to cooperate in the carbon capture and storage business, as well as to explore business opportunities for blue hydrogen and ammonia. POSCO aims to produce 1.26 million tons of hydrogen by 2035.
Write to Hyung-Kyu Kim at Khk@hankyung.com Yeonhee Kim edited this article.
