Sound Oil to farm-out part of stake at C. Kalimantan gas block
Friday, June 20 2008 - 08:31 AM WIB
?At Bangkanai there have been significant increases in anticipated well costs which are no longer consistent with a company of our size. We are therefore negotiating a farm-out or divestment of part of our interest in Bangkanai to reduce our exposure, and to release funds for other exploration and exploitation opportunities. This process has just been approved by the Indonesian authorities and already we have received positive feedback from those potential farminees that we have contacted,? the company said.
Sound Oil plc has a 35 percent interest Bangkanai through its wholly owned subsidiary Mitra Energia Ltd. The block is operated by Pertamina?s subsidiary Elnusa, which has 51 percent interest in the block. The remaining interest in the block is held by JSX-listed oil, gas firm Medco Energi.
Plan of Development (POD) for the Kerendan gas field within the PSC was granted in 2006. The field, first discovered in the 1980s, will be developed to supply gas to a local, new-build integrated power plant. In January 2008, a Memorandum of Understanding was signed with PT Valco Mulia International for co-operation to conclude a Gas Sales and Purchase Agreement which would allow the field development to move forward.
It is hoped that this Agreement can be completed in the course of 2008. The POD calls for the supply of 133 BCF over 20 years at a maximum rate of 20 MMCFD. The development plan will include re-entry of existing wells and up to five new development wells.
Initial field development activities are anticipated to commence in 2007. Progress on implementation of the POD has been delayed by scheduling difficulties for state electricity firm PLN to install the necessary transmission link to export the power from Kerendan to the existing grid connection at Tanjung Batu, East Kalimantan. As a result, discussions are in progress to examine the field development and electricity production costs and gas price structure that may be necessary to finance and accelerate construction of the transmission link. It is now estimated that first gas could be delivered by 2011, the company said.
The operator has informally proposed a drilling programme to include two exploration wells and two Kerendan field re-entry wells commencing in November 2008. This programme is dependent on conclusion of a GSPA for the Kerendan POD in October 2008.
?At this time, the operator has not indicated a defined schedule for the Kerendan field development and how this fits into the exploration drilling in the same area. It is our opinion that the drilling of the proposed Sungai Lahei-1 well is now likely to be deferred until early 2010. This would realise cost savings to all Partners by combining this well with both the drilling of development wells for the Kerendan gas field and the Jupoi exploration well,? it said. (alex)