Salamander updates Indonesian ops
Monday, March 26 2012 - 10:02 AM WIB
Kerendan Field Development, Bangkanai PSC (80%, Operator)
The Group added to its operated position in the Bangkanai PSC, one of its three core areas of activity, during 2011 by acquiring a further 11% of the equity to take its working interest to 80%. The Bangkanai PSC is anchored around the Kerendan gas field development. The Group signed a Gas Sales and Purchase Agreement during 1H 2011 for the supply of up to 20 MMscfd of gas at a price of $4.79 per MMbtu. This commercialised 120 Bcf of gas which will be sent to a new build PLN operated power plant 3 km from the field. As a result of signing the GSA the Group has booked 19.0 MMboe of 2P reserves against the Kerendan field at year end 2011. There is a further 160 Bcf of contingent resource certified on the Kerendan field which the Group will seek to commercialise on completion of further development drilling in 2012. The PLN operated power plant is being built to receive over three times the volumes currently contracted so there will be a ready market to commercialise further resources. The PLN power plant will be connected by transmission lines currently under construction to the main Kalimantan electricity grid.
The DrillCo-1 rig began mobilisation in March 2012 and is expected to be fully rigged up on location and spudding in June. It will complete a development drilling programme on the Kerendan field consisting of three wells. Meanwhile, the gas processing facilities have received Indonesian government approval and will be constructed and ready to deliver first gas by the end of 2013.
In addition to the main Kerendan field, the Bangkanai PSC contains a number of exploration leads and prospects, one of which, the West Kerendan prospect, is scheduled to be drilled during 4Q 2012. West Kerendan is part of the same reefal build up that reservoirs the Kerendan field and is estimated to contain 335 Bcf of mean potential resource in the Oligocene Berai carbonate horizon, the productive zone of the Kerendan field. Beneath the Berai objective in West Kerendan there is a deeper Eocene clastic target in a large four way dip closed structure called Sungai Lahei. The West Kerendan exploration well will be deepened to investigate the potential of Sungai Lahei, which is estimated to have mean resource potential of 580 Bcf. The Sungai Lahei structure was penetrated by Unocal's Kerendan-2 well in the 1980's and although not tested the well logs reveal that there is gas pay in early Oligocene sands close to TD. West Kerendan-1 will drill the same structure updip from Kerendan-2 and is designed to penetrate several hundred metres of Eocene section.
Whilst there is scope to send increased volumes of gas to the nearby PLN power plant, if the exploration potential in the Bangkanai PSC is realised it will be feasible to build a pipeline 220 km to Balikpapan to tie into the East Kalimantan pipeline infrastructure where there are multiple commercialisation options at a higher price than those that can be realised from local power generation.
The Group has also entered into Joint Study Agreements for the North East Bangkanai and West Bangkanai areas that provide it with an opportunity to expand its acreage position in the basin.
North Kutei
During 2011 the Group has been completing its technical review of its North Kutei acreage in light of the play-opening Angklung-1 exploration success at the end of 2010 and incorporating the newly acquired 3D seismic over the SE Sangatta licence. The North Kutei is one of the Group's three core areas, with potential mean recoverable resources of c.3 Tcf of gas and 400 million barrels of oil.
With the Angklung-1 well having tested high gas flow rates from very good quality Pliocene channel sands and providing positive calibration for the 3D seismic, the Group is confident that the numerous amplitude anomalies apparent on the seismic data in the Bontang and S.E. Sangatta PSCs equate to gas-bearing Pliocene sandstones. These are slope channel features with stacked reservoir potential providing multiple objectives for each exploration well.
There is also evidence of further upside in the form of an oil and gas play in the deeper Miocene sandstones. The Angklung-1 well intersected 125 metres of oil saturated Miocene sands but these sands were poorly developed as they lie outside the main channel complexes and so have relatively poor quality reservoir in the Angklung well. However, the new seismic has allowed a much better imaging of the Miocene section and the traps mapped, along with the evidence for active oil seeps across the basin, including a seep that appears to be coming from the bounding fault of the giant Kendang structure on the SE Sangatta licence, highlight the potential of the Miocene play in this under-explored part of the basin.
To begin unlocking value, the Group would like to commit to a contract for a rig and drill up to eight wells across the basin in order to prove up resources. The first targets are likely to be Kecapi, Bedug, Kendang North and Kendang South. The Group has identified approximately 20 prospects and leads that would provide follow on potential. This represents an attractive exploration opportunity with a tangible route to commercialisation and the Group has been in discussions with selected potential partners concerning a farm-out of its position in its two operated PSCs. As part of that process, the Group has had an independent assessment of the resource potential in the North Kutei completed by ISIS Petroleum Consultants. ISIS provides the following resource estimates for the initial prospects:
| Prospect | Licence | HC-Type | Mean Unrisked Prospective Resource | P90 Unrisked Prospective Resource | P50 Unrisked Prospective Resource | P10 Unrisked Prospective Resource |
| Kecapi | Bontang PSC | Gas (Bcf)
Oil (MMbo) |
245
3 |
119
01 |
233
3 |
389
6 |
| Bedug | Bontang PSC | Gas (Bcf)
Oil (MMbo) |
293
15 |
124
2 |
268
12 |
491
30 |
| South Kendang | SE Sangatta PSC | Gas(Bcf)
Oil (MMbo) |
1190
108 |
579
37 |
1063
102 |
1953
188 |
| North Kendang | SE Sangatta PSC | Gas (Bcf)
Oil (MMbo) |
766
134 |
353
65 |
708
125 |
1239
208 |
| ? | TOTAL | (MMboe) | 676 | ? | ? | ? |
| ? | TOTAL Net Salamander | (MMboe) | 534 | ? | ? | ? |
1. Conversion factor 6 Bscf/MMboe
2. Salamander has 100% working interest in Bontang PSC and 75% in SE Sangatta PSC
3. All prospective resource figures are gross unless otherwise stated
In the event of further drilling success, there are multiple commercialisation options for gas in the area. The Bontang LNG plant is less than 100 kms from the Group's North Kutei prospects and provides a very attractive commercialisation possibility with recent export cargoes realising $17/Mcf. The plant currently has two of its eight trains idle and is 1 Bcf per day short of feedstock. In addition to the LNG potential, either for export or for use domestically in Indonesia, local industrial and power generation potential exists in East Kalimantan and could be expected to realise in excess of $7/Mcf.
Also on the Bontang PSC, the Group is currently drilling the Tutung Alpha 3 appraisal well on its Tutung gas condensate discovery. The MB Century Rig 28 is expected to complete the drilling during the second quarter of 2012. Market research reveals a latent demand for gas in this area of East Kalimantan and so even the potentially modest reserves at Tutung could be developed under attractive commercial arrangements.
Other Assets
The Kambuna gas and condensate field (50% - operator) in Indonesia averaged 9,600 boepd during 2011. This comprised 34 MMscfd of gas and 2,400 bcpd. The field has now started to enter the natural decline phase. Compression facilities were installed in 1Q 2012 that will allow the production to continue and so extend the life of the field. It is expected that production from the Kambuna field will average approximately 4,200 boepd during 2012.
The Group sold its five per cent non-operated interests in the ONWJ and SES PSC's in 2H 2011 for $57.7 million. These licences represented low margin, high tax, high cost barrels, in fields that are in long term decline. Therefore, the decision was taken to divest of these assets and reinvest the capital into the Group's core areas where there should be a higher return on investment. Production from these PSC's, averaged over the year, made a net contribution of 4,600 boepd to the Group's 2011 production.
The South Sembakung field development (21%) continued to make progress with three development wells completed during 2011. Work has also been largely completed on the processing facilities and production is on schedule to commence in 2013.
In the Bengara-1 PSC (41%) in the Tarakan Basin of Northeast Kalimantan, Indonesia, the South Sebuku-2 appraisal well was drilled in 4Q 2011 and encountered over 15 metres of net gas-bearing sandstones in the Tabul formation. Drill stem tests ("DSTs") were conducted across three of the gas bearing zones and flowed at an aggregate rate of 10.9 MMscfd. The operator is preparing a Plan of Development for submission to the Indonesian regulator with a view to it being approved before the end of 2012.(ends)