CBM Asia Outlines 2013 Program
CBM Asia Development Corp. has announced its 2013 work program designed to see first commercial gas flows, upgrade resources and potentially generate revenues.
The company’s 2013 work program is production orientated incorporating two production pilot programs, one in the Barito basin and the other in Central Sumatra, as well as dewatering activities at the Sekayu PSC and the Kutai West PSC. The production pilots are planned in areas where CBM Asia holds operatorship, thus avoiding reliance on outside partners.
Barito Basin: The work program calls for one core well on the Kuala Kapuas I PSC and one 5-well production pilot. The exact location of the core well and the pilot are to be determined but negotiations on rig deployment are well advanced. We plan drilling to commence in June. If production rates are satisfactory CBM Asia intends to sell the pilot gas to a small-scale power production unit. Such sales would result in first revenue for the company and assist in establishing a resource calculation for this PSC. CBM Asia is responsible for 100% of the capital cost.
Central Sumatra Basin: The work program calls for one 5-well production pilot. Negotiations on rig deployment are well advanced and we plan drilling to commence in October. If production rates are satisfactory CBM Asia plans to sell pilot gas to a small-scale power production unit generating first revenue and establish a resource calculation for the block. CBM Asia is responsible for 100% of the capital cost.
Sekayu PSC. Operator PT Medco Energi plans to core the CBM-SE-01 well and continue dewatering operations at the CBM-SE-02, CBM-SE-03 and CBM-SE-04 wells. The aim of the dewatering exercise is to determine producibility of the reservoir and to help locate the planned 5-well production pilot.
Dewatering data gathered in 2012 on wells CBM-SE-02 and CBM-SE-03 revealed a significant increase gas production rates as downhole pressure decreased, a positive indicator that desorption is starting to occur. The next step is to individually test the three thickest coal seams at the CBM-SE-02 well to determine their flow characteristics, which will help optimize future well completions at the Sekayu PSC. CBM-SE-03 will continue to de-water the Palembang C coal after pump replacement and cleanup. Dewatering of the CBM-SE-04 well will continue.
CBM Asia expects the dewatering exercise will establish commerciality, production capability and result in an upgrade in resource classification. Having paid its initial earn-in costs, CBM Asia is responsible for 26% of the capital cost at the Sekayu PSC going forward.
Kutai West PSC. Operator Newton Energy plans to drill one exploration well in the western portion of the block and dewater the CBM-KW-01 well to prove production potential and the extent of the coal seam sweet spots in the western portion of the block. CBM Asia is responsible for 30% of the capital cost going forward until we have paid our earn-in costs.
Reduction in Derisking Capex. Much of CBM Asia’s newly acquired and Joint Study acreage in the Barito and Central Sumatra basins is contiguous, thus data gained from one block helps derisk the adjoining block. This close proximity enables CBM Asia to reduce its capital expenditures to derisk an individual PSC to the target 70-80% confidence level to approximately $8.5-10 million including acquisition costs, one-to-three core wells, and one 5-well production pilot. This substantially reduces the Company’s long-term capital requirements, which had previously estimated that two 5-well production pilots were required with a gross expenditure of $15-20 million per isolated PSC.
Central Sumatra Farm-out. The company is actively planning to farm-out material interest of its assets in the Central Sumatra basin to reduce 2013 and future longer-term capital costs and also accelerate production pilot drilling.