Pan Orient to terminate Batu Gajah PSC
Friday, January 13 2017 - 01:21 AM WIB
Courtesy of Pan Orient
Canadian firm Pan Orient Energy Corp. announced Thursday it will terminate the Batu Gajah production sharing contract (PSC) when it expires on January 15, 2017, backing down from an earlier request for a two-year extension of the contract to drill an exploration well at the Akeh discovery.
?Pan Orient has officially notified the government of Indonesia that we wish to terminate the PSC at the end of the 10 year term on January 15, 2017 and as a result, the company will be taking an approximately Cdn$102 million impairment charge related to past exploration expenditures conducted on the Batu Gajah PSC,? the company said in a statement.
The company explained that recent discussions with the government of Indonesia have indicated the possibility of a one year extension to the exploration term of the PSC, specifically only allowing the appraisal of the Akeh-1 discovery made in early 2016 and no other drilling activity.
However, the company said that very recent information has indicated that nearby wells, in close proximity to the Batu Gajah PSC boundary, have performed in a fashion suggesting that the Akeh-1 accumulation is both much more complex and substantially smaller than first believed.
?The implications of this are that it appears very unlikely we would achieve the required commercial threshold for an approved Plan of Development for the Akeh structure, and as a result, it is not possible to justify the expenditures required for the drilling of an Akeh-2 appraisal well, particularly combined with the current and foreseeable oil price environment,? the company explained.
Pan Orient holds a 77 percent interest in Batu Gajah PSC located in onshore sumatra as the operator.
Elsewhere, Pan Orient reiterated in the statement that the operator of the East Jabung PSC has advised that in December 2016 all key permits with regard to road and well pad construction were in hand, and that substantially all of the required equipment and personnel had been mobilized to the site and construction commenced. Drilling of the AYU-1 exploration well is anticipated to commence late in the first quarter of 2017.
Pan Orient, which holds a 49 percent interest in the East Jabung PSC, onshore Jambi Province.
Editing by Reiner Simanjuntak