Andalas Energy and Power Plc Partners with Indonesian National Oil Company

 
TIDMADL 
 
1 September 2016 
 
                         Andalas Energy and Power Plc 
 
                         ('Andalas' or the 'Company') 
 
 Partners with Indonesian National Oil Company to Monetise Multiple Gas Fields 
 
Andalas Energy and Power Plc, the AIM listed Indonesian focused upstream oil 
and gas and power company (AIM: ADL), has signed an agreement (the 'Agreement') 
with PT Pertamina (Persero) ('Pertamina') to establish a joint working and 
steering committee with the objective to fast-track commercialisation of 
marginal gas fields within Pertamina's acreage in Indonesia.  The execution of 
this Agreement represents substantial progress by Andalas in the implementation 
of its gas-to-power strategy with a world-class partner.  Pertamina, listed in 
the global Fortune 500, is Indonesia's national energy company and holds an 
unrivalled position within the country's energy industry. 
 
This Agreement is in line with Andalas' plan to utilise its team's expertise 
and local knowledge to make a significant contribution at the local level 
towards fulfilling the Government of Indonesia's goal of reducing the country's 
power shortfall.  Indonesia is seeking to increase electricity capacity by 
35,000 Megawatts ('MW') by 2019. 
 
  * Agreement recognises that Pertamina and Andalas' personnel have a proven 
    track record in monetising gas fields in Indonesia; 
  * Initial focus is to identify at least five stranded gas fields within 
    Pertamina's acreage in Riau, Jambi and South Sumatra provinces which are 
    suitable for sub-100 MW gas-to-power development in the form of an 
    independent power project ('IPP'); 
  * All target areas have an abundance of stranded gas fields that ADL has 
    identified; 
  * All field and IPP development plans will be based on modular/mobile power 
    plants ('MPPs'), a proven technology that is cost-effective, flexible, 
    scalable and ideal for satisfying power demand at the local level in a wide 
    range of operating environments; 
  * Once the initial five fields have been identified both parties will sign an 
    exclusive joint development agreement ('JDA') to design, construct, fund 
    and operate the IPPs - suitable partners may be invited to join Pertamina 
    and Andalas in the JDA for each development; and 
  * Both parties will work together to generate IPP commercialisation plans for 
    each of the identified marginal gas fields covering all key aspects of any 
    future investment and approval; covering project design, project cost and 
    economic analysis and all regulatory requirements. 
 
Andalas CEO, David Whitby, said: "Working in partnership with Pertamina, the 
Indonesian national energy company, is in our view a testament to the strength 
of Andalas' gas-to-power business concept and the calibre of both our Board and 
local management team, who have an intimate understanding of the country's 
energy sector.  Andalas already has the team and network to make sure the 
partnership has at its disposal everything needed to deliver the targeted IPP 
commercialisation plans. 
 
"Pertamina holds an unrivalled position and has in-depth knowledge of 
Indonesia's oil and gas sector, as well as a substantial portfolio of stranded 
gas discoveries in South Sumatra where there is a major need for power. The 
Andalas team has a significant track record in monetising gas assets in 
Indonesia since 1990.  Together Pertamina and Andalas are uniquely positioned 
to make a significant contribution to Indonesia's economic growth by helping to 
meet the country's growing demand for electricity at both the industrial and 
household level. 
 
"Together with our ongoing initiatives at TOE, this Agreement with Pertamina 
promises to fast track our strategy to build an integrated gas-to-power 
producer with a portfolio of interests which have the potential to generate 
significant value for shareholders.  As a result, we very much look forward to 
working closely with Pertamina to deliver projects that will not only help us 
achieve our objective, but importantly will benefit the people of Indonesia." 
 
Further Information 
 
In 2013, the national electrification rate in Indonesia was 81%, equating to 
over 60 million people without power nationwide.   The regions of Jambi, Riau 
and South Sumatra, which together have a population of over 20 million people, 
have an estimated 5.8 million people  without power.  With this in mind, the 
Government of Indonesia set the ambitious target to add 35,000 MW of new 
electricity capacity for Indonesia by 2019, a 60% increase in total domestic 
power generation, to alleviate the frequent power outages which have hampered 
the country's economic growth.  In November 2015, PLN, the Indonesian state 
owned electricity distribution company, reported that it had signed Power 
Purchase Agreements ('PPAs') for a combined capacity of 9,403 MW or 27% of the 
target. 
 
In parallel with this, the Government of Indonesia has committed to reduce 
greenhouse gas emissions.  As a result, natural gas is expected to become the 
fuel of preference in the short to medium-term due to it being a much cleaner 
fossil fuel than other hydrocarbons such as coal and oil.  To help achieve its 
targets, the Government of Indonesia has been promoting more open access to the 
gas and power markets and actively encouraging new players to participate in 
the country's energy sector, particularly in smaller, sub-100 MW independent 
power station projects. 
 
Gas-to-Power 
 
The smaller sub-100 MW gas-to-power projects are ideally placed to play a major 
part in helping the Government of Indonesia meet its objectives focussing at 
the grass roots level.  Such projects provide a rapid, inexpensive power 
generation option through the use of existing small, modular, potentially 
mobile, off-the shelf, fit-for-purpose equipment which can be swiftly tied-in 
to PLN's national power transmission network.  In addition, an IPP can be 
designed and built according to the size of the gas reserves. 
 
As part of the gas-to-power proposition, Andalas and Pertamina propose using 
MPPs, a proven technology that is in-place in Indonesia today.  As well as 
being much quicker to implement than conventional power projects, MPPs can be 
executed in locations that have the greatest need, require a small land 
footprint, and can be completed on a leasing model, thereby reducing capital 
expenditure requirements.  As a result, MPPs offer a highly attractive 
technical and economic solution for a company like Andalas, which will play an 
important role in assisting the Government with its targets.  As an 
illustration, a 25 MW power station requires approximately 25 Bcf of gas to 
supply electricity to an estimated 40,000 homes which positively impacts the 
lives of many thousands of families. 
 
Agreement with Pertamina 
 
Andalas and Pertamina have agreed to work together to fast-track 
commercialisation of marginal gas fields suitable for development in 
conjunction with IPPs.  Initially the focus will be on building a portfolio of 
opportunities in the Sumatran provinces of Jambi, Riau and South Sumatra where 
the electrification rates are well below the national average and where an 
abundance of marginal gas fields has already been identified and screened. 
 
The agreement with Pertamina includes the formation of a joint working and 
steering committee of which Andalas has two committee members and Pertamina has 
four.  The agreement is for an initial one year term, which can be extended, 
and is non-exclusive and non-binding.  The partners have agreed that the work 
to be performed will be completed at their own cost unless third party input is 
required, which will be shared subject to agreement at that time. 
 
Upon successful completion of this work, it is intended both parties will sign 
a JDA to design, construct, fund and operate each IPP. In conjunction with 
this, the partnership will work to generate plans and applications that are 
suitable for submission to PLN for approval and inclusion in its 10-year plan. 
 
Pertamina - Indonesia's World Class National Oil Company 
 
Pertamina was formed in 1968 by the merger of two Indonesian government 
enterprises, Pertamin and Permina.  It is considered a strategic national asset 
and a key contributor to the Government of Indonesia's revenues via taxes and 
dividends.  Pertamina's role is to carry out integrated core business in oil, 
gas, renewable and new energy based on strong commercial principles both inside 
and outside of Indonesia.  It is the only fully integrated oil and gas company 
in Indonesia and was a pioneer of the LNG export business in the late-1970s and 
early 1980s. 
 
Today Pertamina is ranked 230 on the Global Fortune 500 of companies generating 
over US$41 billion in revenue and with some US$45.5 billion in assets in 2015. 
It has interests in over 230,000 square kilometres of acreage, has over 5 
billion barrels of oil equivalent ('boe') in Proven + Probable (2P) Reserves, 
and in 1H 2016 its production reached 640,000 boe per day, equating to over 50% 
of Indonesia's total hydrocarbon production. 
 
Pertamina's business extends across upstream exploration and production, and 
includes refineries, LNG import and export facilities, geothermal power 
production, gas pipelines, LPG filling plant and service stations.  It also 
includes drilling and production services, shipping, aviation, hotels, 
marketing, insurance and other services. 
 
Andalas has prepared a summary presentation of Pertamina and its Operations. 
The Company's Chairman has also added a new article to the recently announced 
blog, 'Insights from the Chairman'.  Both the presentation and the blog will be 
accessible via the Company's website: http://www.andalasenergy.co.uk/. 
 
                                   **S** 
 
For further information, please contact: 
 
David Whitby          Andalas Energy and Power Plc   Tel: [phone] 
 
Sarah Wharry          Cantor Fitzgerald Europe       Tel: [phone] 
Craig Francis         (Nominated Adviser and Joint 
                      Broker) 
 
 

Lucy Williams         Peterhouse Corporate Finance   Tel: [phone] 
Charles Goodfellow    Limited (Joint Broker) 
 
 
Colin Rowbury         Cornhill Capital (Joint        Tel: [phone] 
                      Broker) 
 
 
Frank Buhagiar        St Brides Partners Limited     Tel: [phone] 
Susie Geliher 
 
 
 
END 
 

(END) Dow Jones Newswires

September 01, 2016 02:00 ET (06:00 GMT)