Indonesia East Java exploration basin

The East Java Basin has a long exploration history stretching back to the late 19th century. Recent activity has typically focused on the well explored shallow water play and this sector is expected to attract the lions share of future exploration investment. Our forward looking analysis is restricted to this play. Husky Energy holds the largest acreage position. It is also the most active explorer and together with JV partner CNOOC added over 600 bcf of mostly commercial resource on the Madura Strait PSC between 2011 and 2013. These gas discoveries achieve very attractive returns. Tough fiscal terms limit the value creation potential from other smaller finds. Indonesia announced its annual licensing round in June 2016 including one block from East Java. Interest is expected to be limited unless the government introduces new fiscal incentives which it is currently debating including flexible exploration commitments tax holidays and biddable profit splits.