Indonesian Joint Studies
Lion is participating in a number of exciting Joint Studies covering both conventional and unconventional resources in Indonesia. The Joint Study process is an effective and relatively low cost mechanism for acquiring PSC’s in Indonesia. By conducting a joint study the participants obtain a right to match bids over the area when it is gazetted in a formal bid round.
A new conventional Joint Study over a highly prospective area in Eastern Indonesia was completed in March 2017 with the final meeting held with University Gajah Mada (who conducted the study) and the Indonesian regulator on 30 March 2017. By conducting the study Lion gains preferential rights to area of over 6,500 km2. The exact location of the area remains commercially sensitive.
In May 2017 Lion announced it reached agreement with its partner in the Joint Study, Transform Exploration Pty Ltd, to acquire their 50% rights to the area in exchange for issuing 4.8 million Lion ordinary shares (refer Lion’s Announcement of 17 May 2017). As a result, Lion now has 100% of the rights to the area.
Lion has identified substantial potential in Indonesia, and in particular in Sumatra for unconventional resources of shale gas, shale oil, tight gas and tight oil. With the encouragement of the Government of Indonesia and a framework of new regulations, Lion has clear strategy to build on our first mover position and consolidate an impressive unconventional acreage position.
Lion has rights to progress four Joint Study Applications submitted to date. Two are over parts of the North Sumatra basin and two in the Central Sumatra basin. The total areas of the application made to date are over 17,000 km2 and have the potential to contain mult-tcf gas potential and multi hundred million barrels oil.
Lion Energy received formal approval from the Directorate General of Oil and Gas (MIGAS) of the award of two of the unconventional joint studies applications over highly prospective areas in Indonesia’s North and Central Sumatra Basins, details of these joint studies are below:-
Lion holds a 55% interest and is Operator of the joint study with the partly overlapping conventional PSC holders (Bukit, New Zealand Oil and Gas and SBL) having 45% interest. The cooperation with conventional holders will allow the joint venture to capture significant synergies between conventional and unconventional exploration.The North Sumatra Basin is one of the major onshore basins in the SE Asian region with over 25tcf of gas and over 1.3 billion barrels of oil and condensate discovered. Lion’s evaluation recognises that key elements are in place for prospective unconventional (shale gas/oil and tight gas/oil) acreage.The joint study, undertaken with Padjadjaran University in Bandung, was completed in February 2016, highlighted the highly material potential within the joint study area with the key prospective intervals in Lower to Middle Miocene Belumai and Lower Baong formations. The timing of the release of the resultant PSC for tender will be dependent upon MIGAS, at which time Lion and its consortium members will have a right to match the highest offer for the block (if any).
Interest holders in the Bohorok unconventional joint study application are as follows:
|Lion Energy (Operator)||55.00|
|New Zealand Oil & Gas||20.25|
|Surya Buana Lestarijaya||04.50|
An unconventional joint study, covering 2481km2, located in the east of the Central Sumatra Basin covering part of the Bengkalis Graben was awarded on 20 February 2015.
Lion has a 75% interest in this joint study. The conventional rights holders in the area of the joint study have an option to maintain a 25% interest in the resultant PSC, if awarded, by paying 25% of the joint study costs at completion of the study. Lion in return will evaluate the conventional potential of the area with the opportunity to review an interest if technically warranted. This cooperation between conventional and unconventional rights holders is a key to Lion’s strategy to capture significant synergies in exploration and appraisal of the region.
The Central Sumatra Basin is a world class petroleum province with over 13 billion barrels of oil discovered. The Bengkalis Graben, located in the east of the basin, is one of a number of prolific depo-centres within the province. It hosts major discoveries; encouragement for the unconventional potential (shale gas/oil and tight gas/oil). Evaluation by Lion indicates the prospective source rocks in the area are at a suitable maturity and depositional setting to be highly attractive unconventional targets.
The joint study was conducted with the Institute of Technology Bandung which integrated regional geological and geophysical information was completed in February 2016. As a result of the study Lion has subsequently recommended adding additional proximate areas to the study area and this is being considered by MIGAS. The timing of the release of the resultant PSC for tender will be dependent upon MIGAS, at which time Lion and its consortium members will have a right to match the highest offer for the block (if any).
Central Sumatra unconventional joint study interest holders:
In addition to our two completed unconventional joint studies, Lion has submitted two additional Joint Study Applications for potential oil and gas unconventional areas in onshore Indonesia covering a total area of about 10,000km2. Lion’s initial technical assessment has identified potential for multi-tcf scale gas and multi-hundred million barrels of oil in the areas of the applications.
Lion’s strategy to target Indonesia’s unconventional resources is set with a backdrop of:
- The energy demands of a growing population approaching 250 million and still at the steep part of the energy consumption / capita growth curve;
- Solid economic growth. Indonesia’s GDP grew by 6.23% in 2012 and is forecast at 5.8% for 2013;
- Declining production from existing conventional oil and gas fields in Sumatra; and
- Material conventional hydrocarbon reserves becoming increasingly difficult to find and expensive to develop.
Indonesia became a net oil importer for the first time in 2004, and there is a major projected shortfall in gas supply in the energy hungry Sumatra-Java corridor in coming years. The Ministry of Energy and Mineral Resources has a National Energy Mix Target in 2025 to increase the use of natural gas from 21% to 30% of total energy use.
The Government of Indonesia through the Minister of Energy and Mineral Resources issued Ministerial Regulation No 05/2012 on 31 January 2012 to govern the award of cooperation contracts for the exploitation of unconventional (non-conventional) resources. Under the 2012 Indonesian regulation, the definition of Unconventional (Non-conventional) Oil and Gas is relatively broad. The following is an English translation extract from the regulations:
“Non-Conventional Oil and Natural Gas, hereinafter referred to as Non-Conventional Migas, shall be Oil and Natural Gas that is exploited from the reservoir where Oil and Natural Gas with low permeability is formed such as Shale Oil, Shale Gas, Tight Sand Gas, Coal Methane Gas, and Methane-Hydrate, by using particular technology such as fracturing”
The first unconventional PSC was granted to Pertamina in 2013 covering an area in the southern part of the North Sumatra Basin, to the southeast of the South Block A Project. Lion is not aware of the fiscal terms of the PSC however industry anticipates the fiscal terms for unconventional PSC’s will be significantly more attractive to contractors than existing conventional PSC fiscal terms to incentivise nonconventional exploration and exploitation.
Lion has built a considerable knowledge base on Indonesia’s unconventional potential and is leveraging lessons from the success of unconventional plays in the US. The company has targeted areas that meet the following criteria:
- Prospective rocks/geology;
- Access to infrastructure and markets;
- Suitable operational environment; and
- Commercially attractive.
The Joint Study Areas have been assessed to contain significant potential with key target intervals having positive unconventional characteristics and at suitable maturity over large areas. The table below summarises the key unconventional targets.