After ramp-up, production rates are expected to stabilise at between 8000 and 10,000 barrels of oil per day, the partners said.

“First oil production from Oyong is an important milestone for Santos as it adds another operated project to our Asian portfolio,” Santos managing director John Ellice-Flint said.

Likewise, Cue Energy’s chief executive Bob Coppin said the development was important to his company’s growth phase.

“Oyong oil production will complement Cue’s existing oil production from the SE Gobe field in Papua New Guinea and Cue’s oil production will again increase in 2008 when production begins from the Maari oil field in New Zealand,” he said.

Oil is produced via a wellhead platform with five oil wells and two gas wells, with oil processed on the Sea Good 101 production barge and piped to the Shanghai vessel for storage and offtake.

Front-end engineering design to develop the Oyong gas reserves is underway, with a final investment decision expected before year-end, and first gas production anticipated in the first half of 2009.

A gas sales agreement has been signed with PT Indonesia Power, with gas to be piped via a 55-km pipeline to an onshore processing facility adjacent to the Grati power station in East Java.

Santos said its Wortel gas field, discovered last year, is about 7km west of Oyong and could be incorporated into the gas development, subject to further appraisal planned for first half of 2008.

Participants in Oyong and the Sampang production sharing contract are: Santos (operator - 45%), Singapore Petroleum (40%) and Cue (15%).