ConocoPhillips exits Indonesia assets to focus on low-cost-of-supply options

Oil major ConocoPhillips has sold its oil and gas assets in Indonesia for $1.36 billion to Medco Energi, an Indonesian energy firm, after reassessing its asset portfolio in a bid to pursue energy transition opportunities, which would allow it to amass assets with lower GHG intensity, such as LNG.

ConocoPhillips announced on 8 December 2021 that it had entered into an agreement to sell the subsidiary that indirectly owns the company’s 54 per cent interest in the Indonesia Corridor Block Production Sharing Contract (PSC) and a 35 per cent shareholding interest in the Transasia Pipeline Company. 

At the time, the firm also informed that it had intended to exercise its preemption right to purchase up to an additional 10 per cent interest in Australia Pacific LNG (APLNG) from Origin Energy for up to $1.64 billion, through its Australian subsidiary.

Ryan Lance, ConocoPhillips chairman and chief executive officer, explained that the Asia Pacific region plays an important role in the company’s diversification strategy, claiming that “these two transactions enhance that advantage by lowering our aggregate decline rate and diversifying our product mix.” In addition, Lance added that the proceeds from the sale of the firm’s Indonesia assets would be used to acquire additional interest in APLNG.  

This transaction was completed in February 2022 and ConocoPhillips now owns a 47.5 per cent interest in APLNG, while Origin Energy and Sinopec own 27.5 per cent and 25 per cent interests, respectively.

Commenting on this acquisition on 17 February 2022, Lance remarked: “With the global energy transition underway, we expect LNG to play an increasingly important role, as it is lower in greenhouse gas emissions intensity than other alternatives. At the same time, this strategic acquisition of an additional shareholding interest in APLNG further diversifies our product mix while lowering our aggregate decline rate.”

In its update on the sale of its Indonesian assets, ConocoPhillips reported on Wednesday that it had completed the sale of the subsidiary to Medco Energi for $1.36 billion, with an effective date of 1 January 2021. The firm also explained that, after customary closing adjustments, net cash from the sale was approximately $0.8 billion, which accounts for $0.1 billion restricted cash transferred to Medco Energi at closing.

“We are proud of our half-century history in Indonesia and pleased that MedcoEnergi recognizes the value of this business. This disposition is part of our ongoing effort to focus our investments across low cost of supply opportunities,” stated Lance.

The sold assets produced 51 thousand barrels of oil equivalent per day (MBOED) during 2021 and had year-end 2021 proved reserves of approximately 70 million barrels of oil equivalent.

In a separate statement, Medco Energi confirmed the acquisition and elaborated that the Corridor PSC had two producing oil fields and seven producing gas fields located onshore South Sumatra, Indonesia, adjacent to the firm’s existing operations in South Sumatra. Moreover, the Indonesian company added that Transasia enables it to own a minority interest in the gas pipeline network supplying Central Sumatra, Batam, and Singapore customers.

According to Medco Energi, the acquisition of ConocoPhillips Indonesian assets fits its strategy of owning and developing high-quality and cash flow generating assets and reaffirms its commitment to Indonesia’s national development, while providing synergies with its Sumatra operations and further supporting its climate change strategy, including carbon capture opportunities.

This is not the first time that Medco Energi has decided to acquire some of ConocoPhillips’ assets. Back in September 2016, the Indonesian company inked a deal to buy two subsidiaries of the oil major – ConocoPhillips Indonesia Inc. Ltd. and ConocoPhillips Singapore Operations Pte. Ltd – allowing it to get a stake in the South Natuna Sea Block B offshore Indonesia.