Salamander has signed a Sale & Purchase Agreement to acquire the entire share capital of Elnusa Bangkanai Energy Ltd. ("EBE") from PT Elnusa Tbk. EBE holds a 69% interest and operatorship of the Bangkanai PSC, located in the Barito Basin, onshore East Kalimantan, Indonesia. The Bangkanai PSC contains the Kerendan gas field.
With strong demand for gas in Indonesia and the wider SE Asian region, Salamander has been targeting access to gas resources with both commercial and technical upside. This acquisition broadens Salamander's portfolio through the addition of an operated development project that fits the Company's portfolio of gas assets in East Kalimantan. This includes the Tutung discovery in the North Kutei basin and the South Sebuku gas discovery and South Sembakung gas field development in the Tarakan basin. This East Kalimantan gas portfolio will add materially to the Group's production and cash flow from 2013 onwards.
The Kerendan gas field is comprised of a Late Oligocene carbonate reef, the top of which is at approximately 2,750 m depth and which has been penetrated by three wells. The discovery well K-1, was put on long term production test and stabilized at flow rate of over 15 MMscfd and 300 barrels of condensate per day. A resource assessment by DeGolyer & MacNaughton assigned 157 Bcf proved and 207 Bcf of proved plus probable resources to the field. A Plan of Development for the field has been approved by the Indonesian authorities and Salamander expects to progress the development during 2011.
The Kerendan gas has less than 3% CO2 and no H2S. The gas is to be used for local power generation from which electricity will be fed into the regional transmission grid. Negotiations for gas sales to PLN, the Indonesian State power company, are on-going.
Further upside lies beneath the field in the Eocene Tanjung clastics which are yet to be tested. Five prospects have been identified in the PSC, two of which are to be drilled early in 2011. The transaction will add c. 100 Bcf of 1C contingent resources net to Salamander and is expected to contribute between 14 - 17 MMscfd to Group production from 2014.
James Menzies, Chief Executive of Salamander Energy, commented, "This acquisition of an operated interest in the Bangkanai PSC complements our existing portfolio and offers potential synergies with our other gas appraisals and development projects in East Kalimantan. The Kerendan gas field development is a good fit, being of a scale that is operationally manageable yet material for the Company. We continue to see access to low cost, un-contracted gas resources in the region as a major prize, particularly where there is substantial commercial and technical upside."
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