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February 18, 2009

Chevron sets date to decide on Indonesia deepwater gas project

Chevron Corp will decide whether to move to the final design of the deepwater Kutai Basin natural gas project off Indonesia's East Kalimantan province by year-end, the US major oil firm was quoted by Reuters as saying Tuesday.

The Gehem and Gendalo natural gas projects in the Makassar Strait would be the deepest offshore gas fields in Indonesia, at water depths ranging from 2,500 to 6,000 feet (760-1,800 metres).

Chevron, Indonesia's biggest oil producer, had said it planned to invest about $6 billion to develop gas fields off the island of Borneo, including the Gehem and Gendalo projects, which would help Indonesia crank up its flagging gas output.

"We'll be entering FEED (front-end engineering and design) likely early next year," Steve Green, managing director of the IndoAsia unit of Chevron told reporters.

Green said it could then take 12-14 months to look at bids for the work before making a final investment decision, probably in 2011.

Chevron said last month it was reviewing its business plans in Indonesia but was committed to Kutai, in Borneo's East Kalimantan.

"It's too early to speculate on the economics of the project until we nail down the design, cost of the project", Green said during a ceremony at the Minas oilfield in Sumatra island.

Energy Minister Purnomo Yusgiantoro said the project had agreed to supply up to 25 percent of gas to domestic users, which could provide 0.7-0.8 million tonnes of LNG a year.

Oil companies throughout the world have been re-evaluating energy developments given a collapse in oil prices, which has made some projects uneconomic. Deepwater projects are particularly expensive to develop.

An official for energy watchdog BPMIGAS had said there was no proposal to review the Makassar Strait project.

The combined natural gas reserves in the area covered by the plan are estimated at more than 3 trillion cubic feet (tcf).

Indonesia, which has far more gas than oil, has pushed companies to move faster in developing areas as the country badly needs the gas for domestic industries and exports.

Chevron currently produces gas from several other fields in East Kalimantan, but the output is in decline.

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