Some of CNPC's early investments in Indonesia, made when oil prices were lower, have paid off. Its listed unit, PetroChina, bought the Indonesian assets of U.S. oil producer Devon Energy in 2002. CNPC was the country's seventh-ranked producer in 2011 with 3,500 employees and an annual output of about 40 million barrels.
The Limau deal was a departure from PetroChina Daqing Oilfield's normal business model. The oil services company hailed the 2013 agreement as its first "technology-for-resources" deal, having traditionally relied on fees for its income. In this deal, it would trade its expertise in extracting oil from mature fields in return for a share of any increased output, it said in a statement.
In a subsequent statement in June last year, the company said it had completed an "equity acquisition related to the Limau project," without disclosing the seller or the price.
Interviews with Chinese oil industry officials and documents related to the transaction show PetroChina Daqing actually bought Vision Horizon Holdings, a company registered in the British Virgin Islands. A company search shows that Vision Horizon was registered in May 2009. BVI companies are not required to disclose directors and shareholders.
Through other shell companies registered in the tax haven, Vision Horizon is linked to BVI-registered Indospec Energy Limau, the company that holds a joint operating contract for the three Limau blocks. In an interview with Reuters in his Jakarta office, the chief executive of Indospec Energy Limau, Indra Wijaya, confirmed that the company had won the contract from Pertamina through a tender.
A draft of the 91-page contract reviewed by Reuters shows that Indospec Energy Limau is scheduled to invest another $50 million in the first three years of a 20-year operating agreement.
Wijaya, who said he had earlier worked for Pertamina for more than 20 years, confirmed that Vision Horizon was involved in the Limau deal but declined to provide details. Wijaya also declined to discuss PetroChina's $85 million payment. "This is about our business," he said. "I am not going to give any answer."
Unlikely to meet target
Like many of Indonesia's mature oilfields, Limau has been in decline since it peaked in the 1960s. The field covers more than 200 square kilometers of forest and farmland, including patches of rubber and palm oil plantation, in South Sumatra Province.
In a 2013 technical paper, Wijaya and two Pertamina experts advocated using advanced recovery methods to boost output. They reported that production from the three blocks had peaked at 46,000 barrels a day in 1960. A report by Wood Mackenzie, an energy consultancy, showed that by the 1990s, water injection and other recovery methods were needed to keep the field pumping.
A company that earlier operated Limau, Hong Kong-listedSouth Sea Petroleum, said in a stock exchange filing that output for the entire field in 2007 was about 7,000 barrels a day. The combined output from the three blocks is now about 1,200 barrels a day, according to Pertamina's Agustono.
In its 2013 statement announcing the deal, PetroChina Daqing said it aimed to boost production of the three Limau blocks to about 7,300 barrels a day. Upstream industry experts familiar with the Limau field say it is highly unlikely that PetroChina will ever meet this target.