Yahoo Finance Repsol (REPYY) Advances KBD Gas Field Development in Indonesia
Repsol REPYY, the Spanish multi-energy company, has awarded the front-end engineering and design (FEED) contract for Kali Berau Dalam (“KBD”) gas field development to the Indonesian firm, Synergy Engineering. This $630 million project is located in South Sumatra. The Spanish energy company has received the approval for a revised plan of development (POD) for the KBD gas field, which lies in the Sakakemang production sharing contract area in Indonesia.
The revised POD involves the construction of a central processing facility (CPF) around the KBD 2X well pad that is anticipated to have an installed natural gas processing capacity of 135 million cubic feet per day. It also comprises the drilling of two new production wells. Furthermore, the installation of a kilometer-long pipeline is also required to connect the CPF to the existing TGI pipeline.
The KBD field is known to have a high carbon dioxide content of 26%. Due to this, Repsol has included the construction of a 20-kilometre-long pipeline from the central facility to Medco Energi’s Grissik plant for the transportation of liquid carbon dioxide. The project’s scope of work further mentions a produced water pipeline from the CPF to the Kukulambar well pad, for water injection and two water injection wells.
Based on the revised plan, the total cost for the project is estimated to be$631.7 million. This includes $168.8 million in drilling and completion costs, and $462.9 million in production facility costs. The KBD gas development is expected to tap into gas reserves of nearly 474.28 billion cubic feet until 2040.
The Indonesian Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) has highlighted that the basic infrastructure design for gas processing and CO2 separation has been completed in recent months. The regulatory body also expects the FEED study to be concluded by year-end 2024. A SKK Migas official noted that the first gas output from the Sakakemang Block is expected by early 2028, and went on to say that the KBD gas field development is proceeding as per schedule.
The development of this field is particularly monitored by industry experts as it is expected to contribute significantly toward Indonesia’s economy as well as its energy security. A Repsol representative has commented that the KBD gas field holds substantial reserves in place. However, the reservoir is expected to be more compartmentalized than previously expected. This means that the extraction process may be more complex than it seemed.
Repsol has already executed other projects in the region. It completed the Kukulambar-2X exploration well on the Sakakemang PSC, in September 2016. However, appraisal efforts later proved that the well did not have commercially viable reserves for exploitation. Five years ago, Repsol discovered the KBD-2 well, with a substantial estimate of more than 2 trillion cubic feet of recoverable gas reserves. SKK Migas had given the green light for a phased development of these reserves.
However, appraisal efforts later disappointed the company as they led to a significant downgrade in reserves, with a revised volume estimate of 500 billion cubic feet of gas. In case of the KBD-3X appraisal well, a long-term test was conducted that revealed "low productivity" in the targeted reservoir.
Zacks Rank and Key Picks
Currently, REPYY carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the energy sector are Archrock Inc. AROC, SM Energy SM and Hess Midstream Partners LP HESM. Archrock and SM Energy presently sport a Zacks Rank #1 (Strong Buy) each, while Hess Midstream carries a Zacks Rank of #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
SM Energy is an upstream energy firm operating in the prolific Midland Basin region and the South Texas region. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
Hess Midstream owns, operates, develops and acquires a wide range of midstream assets, providing services to Hess Corporation and other third-party customers. The partnership has a stable fee-based revenue model secured via long-term commercial contracts. Since Hess Midstream operates through 100% fee-based contracts, it is exposed to minimal commodity price risks.
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