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Interview

with Tang Zhongfu, President, Citic Seram Energy Limited

20.09.2007 / Energyboardroom

Citic Seram Energy Limited was recently created with a mission to develop O&G business in Indonesia. To what extent is this sector becoming an area of focus for your holding company Citic Resources?

As everyone is well aware, the Chinese domestic market is booming, and as a result its demand for oil is at record-high levels. In order to help meet the growing energy requirements of a fast-growing economy like China, Citic Group (our Beijing-based mother company) through Citic Resources (our holding company based in Hong-Kong) has decided to get further involved in the O&G sector by creating Citic Seram Energy Limited (CSEL) in Indonesia. It is also an ideal moment to expand the company’s portfolio of activities which includes other business lines such as coal and aluminum.

What were the main reasons that made Citic Resources choose Indonesia as its first overseas oil acquisition and the main focus of its O&G activities?

Citic Resources is looking for opportunities around the globe, but Indonesia has turned out being our first O&G operation overseas. There are many good reasons why our company has decided to invest in Indonesia. First of all, there is the PSC mechanism which is an Indonesian creation and thus very mature in the country. It is a system that makes us feel comfortable to invest in Indonesia because it is very clear and transparent. The second reason why we have chosen Indonesia is because it serves as a good platform for Citic Resoruces to expand its business portfolio, thanks to the large amount of oil companies working in this country as PSCs. Being active here allows us to share experiences with them and be well informed about new business opportunities. Thirdly, Indonesia is one of the main LNG producers in the world, which makes the potential for gas development, especially offshore, very interesting.

Where does the Seram Non-Bula PSC currently stand in terms of new exploration, production, and development? What potential does Citic see for this block?

Currently we have a field with a production of about 4 200 bpd, and the general target is to maintain this level. We see a potential upside coming from our exploration activities, which consist of 2 wells drilled this year and plans for 3 more in 2008. Our aim is to increase the level of reserves of this important asset.

This is the first time Citic Resources goes from having passive holdings in O&G to being the operator. What made you decide to take on this role in the Seram Non-Bula PSC?

Although this is the first time Citic Resources acts as an operator in an O&G project, many of us who are now in Citic Seram have already been operators in Indonesia for many years with other companies such as Petrochina. With regards to the Seram Non-Bula PSC, we feel comfortable because we have all our partners’ support. Thanks to our combined experience working in the Indonesian O&G sector, we also enjoy good communication with all of the stakeholders in the country and understand the local laws and regulations.

Besides the Seram Non-Bula PSC, Citic Resources has stated that it is also looking into other O&G business opportunities in Indonesia. How would you describe your global strategy for E&P in Indonesia?

Citic Resources sees this first project as a platform, so depending on how good the results are we will probably go after other business opportunities in the near future. For the moment, our directors and shareholders need to see that developing O&G assets in Indonesia is a good investment decision. Basically, this means keeping up production levels, getting good revenues and adding reserves. Our main challenge now is to find more reserves in order to add value to the company and give our shareholders some good news.

What is the reasoning behind the MOU signed recently with Kufpec for cooperation in exploring oil and gas business opportunities in Indonesia and other countries?

Kufpec is one of our main partners in Seram Non-Bula, owning a 30% working interest in the PSC. I first got familiar with the company during the 5 years I spent working in Kuwait. I came to appreciate their aggressive spirit and the way they explore opportunities with their country’s benefit in mind. This is why we have recommended our head office to develop a partnership with Kufpec, in order to get these two young and ambitious companies to explore together.

In your opinion, how important will Indonesia’s LNG potential be for meeting China’s future energy needs?

China will definitely need a considerable increase of its LNG supply in the coming years. In fact, we see LNG as an even more important source of energy than oil towards the future. Since Indonesia is one of the main LNG producers in the world and holds considerable gas reserves, the Chinese government is naturally very interested in developing business ties with the country in this sector. This also explains why other Chinese companies such as Petrochina and CNOOC are aggressively pursuing opportunities in gas and LNG with other companies and with the Indonesian government.

CSEL is a relative newcomer to the Indonesian O&G sector which includes most of the world’s biggest and most dynamic companies in the sector. What kind of final message would you want to send to them and to OGFJ’s readers?

We have been well received by our peers in the industry who have noticed that there is a new Chinese company in Indonesia with big aspirations for the future. Citic is ready to work together with those partners who share our vision and strategy for growth in the O&G business.

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