Serica updates Indonesian ops
Thursday, November 4 2010 - 10:33 AM WIB
Glagah Kambuna TAC
The Glagah Kambuna Technical Assistance Contract ("TAC") covers an area of approximately 380 square kilometres and lies offshore North Sumatra. Serica holds an interest of 25% in the TAC.
The Kambuna gas is used for power generation to supply electricity to the city of Medan in North Sumatra and for industrial uses. The gas sales prices per thousand standard cubic feet under the contracts with PLN and Pertiwi Nusantara Resources ("Pertiwi") are currently approximately US$5.60 and US$7.00 respectively, escalated at 3% per annum. A third contract for the supply of gas for LPG attracts the same price as the PLN contract and has the potential to add about 10% to contracted gas sales.
Kambuna gas yields significant volumes of condensate (light oil) and currently approximately 80 barrels per million standard cubic feet of gas are extracted for sale. The condensate is sold to the state oil company Pertamina at the official Attaka Indonesian Crude Price less 11 cents per barrel. The Kambuna condensate lifted in September fetched a price of US$78.65.
The three Kambuna field development wells are very productive and, although the three wells are usually on production, if any one well is required to be shut down for maintenance or survey, there is sufficient productive capacity in the two remaining wells to meet contractual gas sales requirements.
In Q3 2010 gross Kambuna field sales were 3,725 million standard cubic feet of gas (Q2 2010: 2,659 mmscf, Q1 2010: 2,016 mmscf) and 309,000 barrels of condensate (Q2 2010: 187,000 bbl, Q1 2010: 165,000 bbl), equivalent to average daily sales for the quarter of 40.5 mmscfd and 3,354 bbl/day. In September 2010, average gas sales of 42 mmscfd were achieved, the highest monthly figure to date.
Under the Take or Pay provisions of the gas sales contracts, at the end of each 12 month contract period the buyers are required to pay for at least 90% of any gas contracted but not taken, subject to exceptions for certain circumstances that may be outside of their control. In subsequent periods, buyers may nominate quantities in excess of the contract rates ("make up gas") in order to recover the gas for which they have already paid. Negotiations with PLN regarding Take or Pay for the year to August 2010 are in progress.
As already reported, the Kambuna field operator Salamander Energy, commissioned an independent reserves audit of its operated fields, including the Kambuna field. This audit was based on early stage reservoir pressure and production data from the field from first production in August 2009 through June 2010, during which period gross daily gas sales averaged only 19 mmscfd because of significant operational difficulties experienced by the gas purchasers. Pending further production information, the operator's reserve auditors have reclassified the Upper Belumai reservoir interval as contingent resources rather than reserves. The Upper Belumai interval represented approximately 20% of the best estimate of gas initially in place in the Kambuna field made by same auditors as at 31 December 2009 for Serica's 2009 annual report.
The operator's new estimates of reserves rely primarily on shut-in and flowing down-hole pressure data recorded in only one of the Kambuna wells during a period of interrupted production and Serica believes that these estimates may be revised upwards as further production data becomes available. However, if the estimates were to be confirmed by future field observations it would result in a reduction in Serica's remaining net entitlement 2P reserves as at 1 January 2010, from 6.0 mmboe to 3.4 mmboe.
An adjustment of reserves to this level would not be anticipated to affect production rates for several years, during which Kambuna field gross average sales of 40 mmscfd should continue to be achievable. In addition the offshore facilities are designed to accommodate a further well, should future reservoir performance indicate this to be required to support production levels in 2012 onwards, and the planned installation of gas compression could be brought forward.
The performance of the field will continue to be monitored throughout 2010 as further production information becomes available and an independent reserves audit will be carried out after the year-end for Serica's annual reserves filings.
Kutai PSC
Serica is the operator of the Kutai Production Sharing Contract ("PSC") and holds a 30% interest. The PSC is divided into five blocks located in the prolific Mahakam River delta both onshore and offshore East Kalimantan, adjacent to several giant fields.
The interpretation of the offshore 3D seismic data has revealed several exploration targets. Serica secured the Trident IX jack-up drilling rig to drill the Dambus and Marindan prospects and the rig was mobilised to the Dambus location in August.
Serica and its partners spudded the Dambus-1 offshore exploration well on 4 September 2010. The objective of the well was to investigate the potential for gas and oil accumulations in a stacked sequence of Miocene sands. Dambus-1 was drilled as a deviated well to a total depth of 3,225 metres MD (2,713 metres true vertical depth subsea ("TVDSS"). Based on the indicative data obtained while drilling, hydrocarbons were encountered in clean sands in the gross interval 2,070-2,102 metres MD (1,787-1,812 metres TVDSS) and there were indications of further hydrocarbon-bearing sands in an interval below 2,760 metres MD (2,340 metres TVDSS). In order to obtain definitive data on the extent of the discoveries, the well was plugged back and sidetracked and wireline logs, pressure data and fluid samples were acquired. Sidetrack Dambus-1ST was drilled to a total depth of 2,800 metres MD (2,568 metres TVDSS). Excellent quality gas-bearing Miocene reservoir sands were encountered in the interval 2,025-2,047 metres MD (1,795-1,816 metres TVDSS) of which the net gas-bearing sands amounted to approximately 18 metres.
Following an extensive logging and sampling programme in Dambus-1ST, the deeper sands were found to be water bearing. The upper gas-bearing sands alone are not currently expected to be commercially exploitable by themselves and the well was plugged and abandoned. Other prospects and leads exist in the area around Dambus and they will be reviewed in light of the Dambus result. The gas discovery at Dambus will reduce the threshold volume required for the development of any further resources that may be discovered in the immediate area.
The Trident IX drilling rig has now moved to the Marindan prospect in the southern offshore part of the PSC which is being drilled as a deviated well in order to test a number of Miocene clastic and carbonate targets in the optimum locations. The Marindan-1 well was spudded on 27 October and will take approximately 30 days to drill.
East Seruway PSC
Serica holds a 100% interest in the East Seruway PSC offshore North Sumatra, Indonesia, adjacent to the Glagah Kambuna TAC. The PSC covers an area of approximately 5,864 square kilometres which is largely unexplored.
Serica is currently interpreting the new seismic data acquired earlier this year and plans to drill an exploration well in the block in 2011. (end of excerpt)