Seram (Non Bula) Block PSC operational update
Tuesday, February 21 2006 - 04:15 AM WIB
Seram (Non Bula) Block PSC
Lion Petroleum (Seram) Limited, a wholly owned subsidiary of Lion Energy Limited, is a 2.5% shareholder in the Seram (Non Bula) Block Production Sharing Contract. The major shareholder and Operator of the Joint Venture is KUFPEC (Indonesia) Limited with 97.5%.
The block contains the Oseil Oilfield.
At January 31st 2006, Oseil was producing approximately 3,200 barrels of oil per day (BOPD) from 8 wells. Oseil #5 is awaiting workover after the downhole pump failed during January 2006. This well normally produces approximately 1,200 BOPD. Oseil #2 is currently being worked over and is anticipated to contribute in excess of 500 BOPD.
Following completion of the above workovers production from the Oseil oil field is anticipated to be approximately 4,900 BOPD.
Oseil #10 is currently suspended and will be completed following the Oseil #5 workover. Depending on the outcome of this well, a decision will be made on further development drilling.
A lifting of approximately 350,000 barrels of HSFO (High Sulphur Fuel Oil) is scheduled for March 2006.
To December 31st 2005, the Oseil oil field has produced a total of 3,304,342 barrels of crude oil. Production in calendar year 2005 was 1,040,041 barrels of crude oil.
Sole Risk Shallow Drilling Project
Lion Energy Limited identified oil prospects Dawang & Solan (together the Sole Risk Shallow Drilling Project) in the Seram (Non Bula) Block PSC in 2000 and proposed to the joint venture that these prospects be drilled in 2001.
The prospects are shallow (less than 650 metre sub sea depth) oil targets.
After all other parties in the joint venture elected not to participate in the drilling of these wells, Lion?s wholly owned subsidiary Kalrez Petroleum (Seram) Limited elected to exercise its sole risk right to drill the wells at its cost.
For various reasons, Kalrez have not completed the drilling of these wells, despite joint venture and government approval to so do.
In January 2006 Kufpec informed Lion Energy Limited that the sole risk right granted Kalrez had extinguished in accordance with the joint venture agreement terms and that a new application will need to be lodged with the joint venture if Lion (or its subsidiary) intends to proceed with this project.
Lion intends to submit to the joint venture that these prospects be drilled and the other joint venture party will then either elect to participate or decline. In the event the party declines, Lion (through its subsidiary), will initiate sole risk rights in accordance with the joint venture agreement terms.
At the conclusion of this process, the joint venture will then submit to the Indonesian government to approve the drilling of the prospects as part of the 2006 work programme.
Whilst Lion remains committed to drilling Dawang and Solan prospects, joint venture and government approvals are required and the earliest possible timing for the drilling would be in the second half of calendar year 2006. (*)