According to a report by Upstream Oil and Gas Supervisory Agency (BPMIGAS), oil giant Chevron Corp. (CVX) signed a deal with ConocoPhillips (COP) to buy gas from the latter on the island of Sumatra. Chevron needs additional gas to support the technology used to extract more oil from its Duri field in Central Sumatra. The technology (steamflood) is said to improve recovery on oil fields.
 
Chevron and Conoco Phillips has agreed to two deals. However, one of the deals was amended, as it met with resistance by politicians claiming it as unfair due to continuous rise in oil prices.
 
Under the terms of the agreement, ConocoPhillips will be supplying 77.9 trillion British thermal units in total for four year as well as an additional 1,177 trillion British thermal units for twelve years. The new gas deal will replace the previous one under which Chervon swapped around 50,000 barrels per day (bpd) of crude oil from Duri with around 400 million cubic feet per day of natural gas from ConocoPhillips’ gas field in South Sumatra.
 
Chevron currently produces about 370,000 barrels per day of crude oil from its operation in Central Sumatra. This final deal will ensure gas supply to support Chevron’s operations in Sumatra in the long term.
 
Production in Indonesia softened in the recent years mainly on account of lesser field integration, thereby turning to a major importer of crude oil. On the whole, Southeast Asia’s largest market used to produce about 1.5 million bpd about a decade ago, which has now dropped to below 1 million bpd.
 
We believe Chevron has a robust production growth profile, a track record of solid operating performance and scopes of improvement in proved reserves. The company also possesses exceptional financial flexibility, which enables it to capitalize on investment opportunities or to increase share repurchases and dividends.
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