Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Medco Energi eyes more acquisitions in Southeast Asia, ESG in focus

© Supplied by Medco EnergiMedcoEnergi chief executive Roberto Lorato
MedcoEnergi chief executive Roberto Lorato

Indonesia’s Medco Energi (IDX:MEDC) is on the lookout for more merger and acquisition (M&A) opportunities in Southeast Asia after successfully buying ConocoPhillips Indonesian assets in a $1.355 billion deal struck last year.

Significantly, ESG is playing a large role in shaping the oil and gas company’s future as it boosts its renewable energy portfolio and eyes CCS projects.

The ConocoPhillips deal, which completed in March and covered the giant Corridor Block, almost doubled Medco Energi’s oil and gas output – expected to hit 160 thousand barrels of oil equivalent per day (boe/d) in 2022.

Now, the Indonesian-listed independent is scanning the horizon for more acquisition opportunities around producing assets. “Some large opportunities might open up, but there are not that many compared to a few years back, only a few may come to market in the near future,” Roberto Lorato, chief executive of Medco Energi, told Energy Voice.

The focus of any expansion will be in Southeast Asia, particularly Indonesia, Malaysia, and Brunei, where material opportunities exist, he added. Aside from materiality, the key criteria for any M&A deals includes: operatorship, Medco Energi likes to be in control, especially in relation to determining its ESG strategy; and natural gas assets are preferred to oil. The company also has less appetite for frontier exploration, unless its natural gas.

Crucially, environmental, social, and governance (ESG) factors will be key in any material investment decisions – project investment or M&A. “ESG and the climate emergency will not go away. Medco Energi has progressively transitioned from a pure exploration and production company to an energy company,” said Lorato.

“We are committed to being a large producer of hydrocarbons, mainly natural gas. But at the same time, we are not just announcing, but investing in renewable energy, which will become an increasingly significant part of our portfolio over the next years,” added Lorato.

© Supplied by Medco Energi
Operations at Medco Energi’s Corridor Block in Indonesia

Medco Energi also has a power division, which provides a platform for the company to expand within the renewable energy sector. Medco is mainly looking at geothermal and solar opportunities in Indonesia. Its Sumbawa Solar PV 26MWp project is targeted for commercial operation by the end of June, a 30MW geothermal development in Ijen, East Java is progressing, while a power purchase agreement (PPA) for a solar PV 2×25 MWp facility in Bali has been signed with state-backed utility PLN, which has a monopoly on electric power distribution in Indonesia. Medco is also part of a consortium that is proposing to develop a solar PV project on Indonesia’s Bulan island that aims to supply electricity to Singapore.

Climate Change Strategy

The company’s climate change strategy covers three pillars. Firstly, decarbonisation by reducing emissions and flaring, using renewable energy to operate producing assets, as well as abating emissions via carbon capture and storage (CCS) or carbon capture utilisation and storage (CCUS) projects. Secondly, Medco Energi is making the transition towards low-carbon energy. This includes further expansion into the natural gas, and possibly liquefied natural gas (LNG), sectors, as well as increasing investments in renewable energy. Thirdly, the company will be seeking to manage the physical risks caused by climate change to ensure its operating assets are protected from extreme weather.

Medco Energi has a number of studies progressing on CCS and CCUS, which will be crucial as the company will not be able to monetise upstream oil and gas without capturing carbon dioxide (CO2), said Lorato.

Although the development of Indonesia’s carbon policy remains at a very early stage, “there is a lot of goodwill from the Indonesian government to play a part in the CCS story and facilitate projects. However, it’s complex and takes time to understand the opportunities,” he added.

Spanish company Repsol has advanced plans for a CCS project at its Sakakemang Block that would be linked to Medco Energi and is projected to start operations in 2027. Repsol, which is developing Sakakemang, is studying the potential to inject CO2 into the Dayung and Gelam fields within the nearby Corridor Block operated by Medco Energi. Medco Energi holds a 54% stake in Corridor, with Repsol on 36% and Pertamina 10%.

The Corridor PSC has two producing oil fields and seven producing gas fields located onshore South Sumatra, Indonesia, adjacent to Medco Energi’s existing operations in South Sumatra. The majority of production is sold under long-term gas contracts to Indonesian and Singapore customers.

Medco Energi, which was founded by Indonesian businessman Arifin Panigoro in 1980, has benefited from international oil companies (IOCs) repositioning their portfolios in the region and has made various sizeable acquisitions in recent years. Aside from the recent ConocoPhillips acquisition, the company acquired Ophir Energy in a deal valued at GBP408.4 million in 2019.

Outside of Southeast Asia, the company has upstream assets in Tanzania, the Middle East and Mexico. However, 80% of the company’s activities are in Indonesia.

Recommended for you

More from Energy Voice

Latest Posts