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CRH to head oil venture in Indonesia

Hong Kong-listed CITIC Resources Holdings announced Wednesday that one of its wholly owned subsidiaries has entered into an agreement to acquire a 51 percent interest in a petroleum exploration and production project in Indonesia for US$97.4 million (HK$759.7 million).

StevenLee

Friday, July 14, 2006

Hong Kong-listed CITIC Resources Holdings announced Wednesday that one of its wholly owned subsidiaries has entered into an agreement to acquire a 51 percent interest in a petroleum exploration and production project in Indonesia for US$97.4 million (HK$759.7 million).
Upon completion of the acquisition, subject to Indonesian government approval and other unspecified requirements, CRH, a unit of mainland state- owned conglomerate CITIC Group, will have the right to explore for and produce oil from what is called the Seram Island Non-Bula Block until 2019. Seram is the largest of the "Spice Islands" in Indonesia's eastern region.

"This is CRH's first oil project in Indonesia and it marks an important milestone for CRH in gaining exposure in the oil and gas sector in Southeast Asia," CRH chairman Kwok Peter Viem said.

Under the proposed deal, CITIC Resources will assume operation of the oilfield from Kufpec (Indonesia) Ltd, a subsidiary of Kuwait Petroleum Corp, with the Indonesian company retaining a 30 percent interest.

CITIC said its US$97.4 million purchase price will be funded through internal resources and existing loan facilities.

The Seram Island project occupies an area of about 4,572 square kilometers, with production in the first six months of 2006 averaging about 4,300 barrels per day.

"We expect the production will grow gradually and it will reach its peak in two or three years," CRH vice chairman Shou Xuancheng said. Gross oil reserves are estimated at about 39 million barrels. Shou forecasts the project will be profitable in a few years.

CITIC Resources shares closed Thursday at HK$1.36, up 7 HK cents