AWE has entered into an agreement to earn a 42.5% interest in the offshore oil and gas Bulu Production Sharing Contract (PSC) area in the East Java basin, Indonesia.

AWE will contribute up to a maximum of US$12 million primarily towards the drilling of two offshore wells to earn a 42.5% interest from Pearl Oil (Satria), a wholly-owned subsidiary of Aabar Petroleum Investments Company.

After approval of the transaction by the relevant Indonesian government authorities, and completion of the earning program, interest holders in Bulu will be AWE (42.5%), Aabar (42.5%), PT Satria Energindo (10%) and PT Satria Wijaya Kusuma (5%).

The Bulu PSC covers about 3495sqkm and is about 40km off the north-east coast of East Java. The area has water depths of up to 60 metres.

The East Java sedimentary basin is a significant oil and gas producing region and the area surrounding Bulu contains a number of oil and gas accumulations, including the Pangkah, Poleng and Kepodang fields.

Drilling within Bulu PSC is expected to start in the third quarter of 2007.

AWE managing director Bruce Phillips says: "This transaction is consistent with AWE's stated objective of diversifying the company's asset base beyond Australia and New Zealand in the future. AWE has evaluated a substantial number of investment opportunities in Indonesia over the last 18 months and this initial transaction is the first that has met our technical and commercial risk criteria."