South Block A Project
Lion has a 40.7% interest in the South Block A PSC through our wholly owned subsidiary KRX Energy Pte Ltd.
The underexplored block is centrally located in the prolific North Sumatra Basin and contains large structures with attractive gas and oil plays. The region has a strong demand, high priced gas market and a new open access pipeline connected to Medan extends through the PSC acreage.
The South Block A PSC which, following a January 2017 relinquishment has an area of 421km2, is divided into two separate blocks, the western block is known as Area 1 and covers an area of 366km2, while the smaller Area 2 block to the east, extends over the coastal boundary with an offshore portion, and covers an area of 55km2.
Amanah Timur-1 was drilled by the Joint Venture in January 2017 and was a discovery with gas and condensate flared and interpreted oil zones. Appraisal drilling is planned in 2017 and development planning is ongoing. The Amanah Timur location is also within 6km of the city of Langsa with a population of approximately 150,000. The region has a gas market with solid demand, consequent high prices and a new open access pipeline to Medan extends through the PSC acreage and within 100 metres of the Amanah Timur location.
The block contains attractive plays and continuations of structural trends that have been productive in adjacent blocks. Of particular note, the block contains the world-class Jerneh prospect with an area of up to 60 km2 making it arguably the largest undrilled prospect in the North Sumatra Basin.
The North Sumatra Basin is one of the most prolific hydrocarbon provinces in Indonesia with over 80 known oil and gas fields. The United States Geological Survey World Petroleum Report (2000) indicates that reserves of approximately 25.6 TCF of gas, 900 MMBBL of natural gas liquid and 700 MMBBL of oil have been found in the North Sumatra Basin. Recent exploration drilling results in adjacent PSC’s are encouraging. In 2012/13 operator Medco, in the Block A PSC, drilled the Matang-1 gas discovery. Participant in the well, Premier Oil, reported in a press release on 3 May 2013 that the well flowed 25 MMSCFD with 15% CO2 and recoverable gas resource reported in the 100-400 BCF range
The South Block A Joint venture has identified an attractive portfolio of leads with combined P50 Unrisked Prospective Resource1 of 515 BCF gas and 25 MMBBL oil/condensate with Lion’s share being 209 BCF gas and 10 MMBBL oil/condensate. An estimate of probability of success of these leads range from 11 to 48%.
Lion’s share of prospective resources following the acquisition of an additional 5.7% equity from POGI in 2016 are detailed in the following table:-
1Prospective resources:the estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
2Aggregation method:Prospective Resources in this Table have been estimated probabilistically at prospect level but combined arithmetically to provide the portfolio number.
The largest of the prospects is Jerneh, which has over 60 km2 potential areal closure and has a similar objective as the 2013 Matang discovery in neighbouring Block A. The Joint Venture is currently working on plans to drill this exciting prospect in 2017
In 2014, the Joint Venture completed a 183km high quality 2D seismic survey which targeted the Simpang, Jerneh, Amanah, Sungai lyu and the Paya Bili prospects. The seismic survey was completed safely and on budget. The data confirmed a highly attractive prospect portfolio. Based on these results, the Joint Venture selected the Amanah Timur oil and gas prospect for the 2016/2017 commitment well. The well successfully tested the Paya Bili Prospect and further appraisal is planned in 2017. In addition, the joint venture anticipates selecting the large, operationally more challenging, Jerneh gas/condensate target for a planned late-2018 drilling campaign.
The Joint Venture has also identified potential for significant oil or gas prospective resources in tight sandstone and tight carbonate reservoirs within some of the large structural anticlinal trends. In addition, Lion considers that the block has substantial unconventional shale gas potential and existing conventional rights holders have preferential rights to conduct an unconventional joint study through the direct proposal process.
The Amanah Timur-1 well had a planned total depth of approximately 570m KB and was designed to test a well-defined anticline which has existing shallow oil reservoirs that produced approximately 200,000 barrels of oil in a period prior to WWII.
The well spudded on 3 January 2017 and 9 5/8” casing was set at 78.5m KB. The well drilled an interbedded sandstone, claystone, shale and siltstone section within the Late Miocene age Keutapang Formation in 8 ½” hole. Key objective intervals were penetrated between 26-58m high to pre-drill prognosis with strong gas and good oil shows. The total depth of 347m KB was reached on 11 January 2017.
High gas readings encountered from the “700” sandstone objective required the mud weight to be raised from 11 ppg to approximately 14 ppg with some gas flared reducing the gas influx in the mud. During operations to ensure the well was stabilised, the drill string unfortunately became stuck. Efforts to free the pipe were unsuccessful and the joint venture, supported by the drilling contractor and the Indonesian regulator, decided the most prudent action was to cement the well to ensure isolation of hydrocarbon zones. Cement was pumped early on 19 January 2017, plugging and abandoning the well. Lion is currently working on appraisal plans.
The well met the remaining firm commitment program and the PSC was extended by the relevant authorities for four years with expiry now scheduled for January 2021.
Please click here to view further information on the completion of the Amanah Timur-1 well.
Summary conditions of the South Block A PSC:
|Type||South Block A Project|
|KRX South Block A equity||40.7% (extra 5.7% obtained following withdrawal of POGI subject to Government approval)|
|Other participating interest holders||RENCO Elang Energy Pte Ltd (59.3%)|
|Gross area||421 km2 split into 2 areas, Area 1 comprises 366 km2 and Area 2 comprises 55 km2.|
|Date of the PSC||5 May 2009|
|Government participation rights||10%|
|Initial Exploration Period||6 years comprising initial 3 year firm commitment followed by option to a further 3 year term.|
|First Additional Exploration Period||4 years|
|Relinquishments||80% before 4 December 2016 (to be reduced accordingly if a discovery over a surface area covering more than 20% of the original contract area is made). A 10% (210.5km2) early relinquishment proposal was approved on 17 December 2013 covering areas to the south east and also north west of Area 1. This reduced total Block Area to 1,894.5 km2. In 2015 a further relinquishment of 15% reduced the area to 1,580 km2. In January 2017 a final relinquishment was made on entering years 6-10 with area now 421 km2|
|Signature bonus||US$1,050,000 (paid)|
|Equipment and/or service bonus||US$50,000 (paid)|
|Work commitments for the first three contract years (being the firm commitment component of the exploration period)||In 2013 (Contract Years 1 and 2):
In 2014 (Contract Year 3):
|Indonesian regulator has granted the SBA PSC a 4-year extension to the exploration term, to 22 January 2021.||The “non-firm” work program in the extension period comprises 3 wells and 50 km2 of seismic. Progress will be reviewed by the regulator after 2 years.|
Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery (geological chance of success or GCOS) and a chance of development (economic, regulatory, market and facility, corporate commitment or political risks). The chance of commerciality is the product of these two risk components. There is no certainty that any portion of the prospective resources will be discovered and, if discovered, there is no certainty that it will be developed or, if it is developed, there is no certainty as to either the timing of such development or whether it will be commercially viable to produce any portion of the resources.