Chevron, ConocoPhillips in Indonesia gas supply deal

JAKARTA, Aug 5 (Reuters) - Chevron Corp (CVX.N), the biggest oil producer in Indonesia, has signed a preliminary deal worth $2.5 billion to buy gas from ConocoPhillips (COP.N) on Sumatra island, officials said on Wednesday.

Chevron needs the gas to support technology used to coax more oil from its Duri field in Central Sumatra. The technology, known as steamflood, can enhance recovery on oil fields where output is declining.

The gas deal will replace a previous agreement under which Chervon swapped around 50,000 barrels per day (bpd) of crude oil from Duri with around 400 million cubic feet per day of natural gas from ConocoPhillips' gas field in South Sumatra.

"We expect the final purchasing deal to be signed as soon as possible," said Amir Hamzah, an official at Indonesia's energy watchdog, BPMIGAS.

Gareth Johnstone, a Chevron spokesman, said in an email the deal would help Chevron maintain oil production targets.

"This agreement will secure a reliable gas supply for steamflood facilities, which is critically needed to optimise the crude oil production from Rokan Block," he said.

The Duri field is in the Rokan block.

Another BPMIGAS official, who declined to be identified by name, said Chevron was currently producing around 300,000 bpd of crude from its Duri and Minas fields in Sumatra.

Indonesia has turned into a net importer of crude in recent years, as production has slumped after a failure to tap new fields fast enough.

The Southeast Asian country was producing around 1.5 million bpd about a decade ago, but production has now slumped to below 1 million bpd.

Indonesia's crude oil production slipped to 826,600 bpd in July, from 829,200 bpd in June, after several wells were shut for technical reasons.

The country's condensate output was 120,000 bpd in July, unchanged from June.

(Reporting by Muklis Ali; Editing by Ed Davies)