EWC updates reports on Sengkang gas fields, LNG project
Saturday, February 28 2009 - 02:17 AM WIB
? Sengkang Gas Fields, Sengkang PSC (100 %interest, onshore South Sulawesi)
Energy Equity Epic (Sengkang) Pty Ltd. (EEES) owns and operates the Sengkang PSC. The Sengkang block Production Sharing Contract (PSC) sold 9821 TJ of gas during the year compared with 8537 TJ in 2007. Gas sold for the half of year ended 31 December 2008 was 5692 TJ.
The Sengkang PSC, covering the 2,925.23 sq. km Sengkang Contract Area, includes one developed and producing gas field (Kampung Baru) and four undeveloped gas fields (Walanga, Sampi-Sampi, Bonge and Sallo Bullo) with 695 BCF proved and probable reserves as at 31 December 2008.
Development of gas fields in the Sengkang Contract Area has been limited to the requirements for the supply of gas to the Sengkang Power Plant from the Kampung Baru Gas Field. We have identified thirty prospects, that is, potential accumulations of gas within the Sengkang Contract Area which have not so far been drilled, giving substantial additional prospective gas resource in excess of 2.25 TCF.
In addition there are numerous leads in the Sengkang Contract Area which require more data acquisition or evaluation that could increase the prospective resource to between 5 TCF to 7 TCF. Our petroleum consultant, Helix RDS, has verified that as at 26 August 2008 remaining proved developed and undeveloped reserves from our Kampung Baru Gas Field, which is the only field currently in production, are 415 BCF.
In respect of the further four gas fields, which have not yet been developed, proved undeveloped reserves are 170 BCF, with further probable reserves of 115 BCF respectively.
Of the proved reserves in our Sengkang Contract Area, approximately 343 BCF will be required to meet the gas demand of the Sengkang Power Plant with ultimate capacity of 315 MW to the end of the Sengkang PPA in September 2022.
EEES is responsible for the repair and maintenance of our Sengkang (gas Plant and Sengkang Gas Field infrastructure.
Natural gas from the production wells in the Sengkang Contract Area is piped to the central processing plant (?CPP?) located in Wajo Regency, South Sulawesi. The CPP processes the gas to reduce the water, hydrogen sulphide and carbon dioxide content and the gas is then transmitted via a 29 km 8-inch diameter pipeline to the Sengkang Power Plant.
Our gas production, pipeline and gas processing facilities are being upgraded, improved and supplemented in order to accommodate the increased gas supply to our Sengkang Power Plant associated with the Sengkang Expansion.
In close co-operation with BP Migas, EEES are formu1ating a development plan fur further exploration and development of identified prospects within the Sengkang Gas Field, including the drilling of production, exploration and appraisal wells in the course of 2009.
Current Developments
? Sengkang LNG Project
Of the proved reserves in our Sengkang Contract Area, approximately 343 BCF will be required to meet demand from Pertamina under the Gas Supply Agreement and any requisite extension thereto if the Sengkang Power Plant is upgraded to 315 MW as referred to above.
In addition, we have calculated that more than 2.25 TCF of prospective gas resources may be available in prospects which have been identified in the Sengkang Contract Area. In order to exploit these gas reserves and prospective resources, we are constructing an LNG facility and export infrastructure, using our modular LNG train, on the South Sulawesi coastline, in the same region as our Sengkang Contract Area and Sengkang Power Plant.
The Sengkang LNG Facility will have a production capacity of 2 MTPA and combine four modular LNG trains, each with a production capacity of 0.5 MTPA. Production of LNG from the modular LNG train planned is to commence in 2010.
We already have proved reserves sufficient to produce 1 MTPA of LNG for more than 5 years. By utilising existing gas reserves for this LNG production we plan to be able to use internally generated cash flow to finance the foreseen further gas field development in the Sengkang Contract Area. If development of gas resources justify (which cannot be known at the present time), we envisage expanding the capacity of the Sengkang LNG Facility up to 5 MTPA through a phased development of additional 0.5 MTPA modular LNG trains.
Total capital expenditure on the Sengkang LNG Project, to enable production of 2 MTPA of LNG is expected to be US$350 million which is expected to be financed from a combination of non-recourse project finance and the proceeds of our placement of Shares in May 2008.
We have mandated Standard Chartered Bank and Mizuho Bank as advisors for the financing of the Sengkang LNG Project. On 25 July 2008, we entered into a loan facility with Mizuho Bank and Standard Chartered Bank for a US$60 million loan facility and letter of credit to finance capital expenditure for or in connection with the Sengkang LNG Project, including but not limited to making payments to Chart. During the half year period loan funds of US$60 million were drawn down from the above & facility
Strategic Alliances
We have formed strategic alliances with the principal equipment suppliers to the Sengkang LNG Project, Chart and Siemens. Collaboration with these industry leaders over several years on our concept for a modular LNG train led to the realisation of our configuration for our modular LNG train. This will use standardised 0.5 MTPA LNG liquefaction units made up of proven ?off the shelf technology. We entered into strategic alliance agreements with Chart on 4 August 2007 and with Siemens on 19 September 2007 respectively to develop further mid-scale modular LNG projects using our modular LNG train.
LNG Customers
We are currently in discussions regarding LNG sales with parties in China, Japan, Indonesia and the Philippines. On 30 May 2008, we entered into a MOU with Indonesia Power, a subsidiary of PLN, to negotiate the supply of LNG initially to three of their power stations in Java and Bali.
Under this MOU it is proposed that the supply of LNG will be under a 10 year agreement, initially providing for the supply of up to 1.5 MTPA of LNG If an agreement is concluded with Indonesia Power, we would develop LNG receiving and re-gasification facilities at these power plants to receive LNG from our Sengkang LNG Facility under the MOU.
Indonesia Power is also seeking our supply of up to 5 MTPA of LNG in a subsequent phase to replace fuel oil in its other power stations. We understand that Indonesia Power is looking to use cleaner and more efficient natural gas to replace diesel fuel oil in its power generation facilities.
Comparison of our LNG approach and the conventional LNG approach
For the last 30 or so years, the LNG business, especially in Asia, has consisted of a standard model, involving the construction of a large-scale LNG facility of 4 MTPA or above, at a cost currently in excess of US$3 billion, requiring a 600 MMscf/d gas supply and 4.8 TCF or above certified proven gas reserves for a 20 year off-take contract.
This model necessarily leads to a large quantity of stranded gas in Asia, that is, gas reserves which are not considered commercially viable for a conventional LNG development because 4.8 TCF is a major accumulation for a single field and aggregating the supply from a number of smaller fields to provide the required amount of gas is logistically and commercially difficult.
Usually, in order to get an off-taker to commit to buy LNG under a long-term (20 year) contract, the gas feedstock had to be certified by an international certifying company. This process generally takes years to conclude, 5 years being very typical. Many gas wells usually have to be drilled in order to prove the existence of the required gas reserves which is a very capital intensive and time consuming process.
Banks typically will require the commitment of an LNG purchaser under a long-term off-take contract in order to finance such LNG projects. This means that ground for an LNG facility usually cannot be broken until 4.8 TCF of gas reserves are proven, adding, in some cases, years to the start of a project. The financing costs for development and time to market for sate of LNG are paramount for a developer and have been major obstacles to the development of stranded gas fields.
We believe we are breaking this model through pursuing a non traditional approach by providing a mid-scale LNG facility incorporated in 0.5 MTPA modular LNG trains. One modular LNG train requires only 25 BCF per year or a 70 MMscf/d gas supply, an amount relatively easily attainable from typical Indonesian gas wells.
Our Sengkang LNG Facility?s modular construction provides substantial flexibility and downside risk protection as when a gas field is depleted, each modular LNG train and the associated plant is small enough to dismantle and relocate.
Several 0.5 MTPA modular LNG trains can be combined as appropriate for larger accumulations of gas or to meet increased LNG demand. (end of excerpt)