Black Platinum Energy Outlines Drilling Plan for 2 East Natuna Blocks

Black Platinum Energy Ltd. (BPE or the Company), a private equity funded oil and gas exploration company, announced Thursday that it has plans to forge ahead with exploration and appraisal/development activities to prove up its shallow gas plays in East Natuna, offshore Indonesia. The Company plans to drill one exploration well, Paus Hitam-1 in its Sokang Production Sharing Contract (PSC) and one or two appraisal wells in its North Sokang PSC within the next 12-18 months.

Planned Sokang PSC Exploration Activities

One exploration well is planned in early 2017 targeting an unrisked mean exploration prospect, Paus Hitam-1 of P50 878 billion cubic feet (Bcf) in the Lower Pliocene sands at a total depth (TD) of 2,881 feet (878 meters). The Sokang PSC was the site of a three well exploration campaign (Paus S-1, Paus NE-1 & 2) in the early 1970’s which was targeting resources in the Miocene. All three wells penetrated gas columns with no carbon dioxide (CO2) detected in the Upper & Lower Pliocene and were deemed shallow gas hazards at that time.

Judiana Ardiwinata, CEO of the Company stated that “recent success in the Upper & Lower Pliocene (in interval above 2,625 feet or 800 meters) in the adjacent North Sokang PSC (East Dara gas discovery) provides a low CO2 play analogy for a Paus Hitam-1 well”.

Judiana further stated that “a successful result in a Paus Hitam-1 well along with the adjacent East Dara gas discovery would further boost the commercial potential of shallow gas in the East Natuna region and likely unlock a huge amount of potential gas resources in the greater Natuna Sea which were previously deemed shallow gas hazards and not commercially viable”.

Judiana indicated that “the Company is actively looking for farm-in Parties to drill the Paus Hitam-1 exploration prospect but given the recent decline in drilling costs that it would drill the exploration well on its own, if necessary.”

Planned North Sokang Appraisal/Development Activities

One or two appraisal wells are planned in mid-2017 on the East Dara gas structure to further test/prove up the Upper & Lower Pliocene gas resources and move this gas discovery into a development phase.

The Company plans to drill a Dara 5 appraisal well on the West Flank of the East Dara structure targeting the Upper Pliocene sands with a possible second appraisal well, Dara-6 on the high of the East Dara structure targeting the Lower Pliocene sands.

In November 2012, the Company completed two exploration wells on the East Dara structure in its North Sokang PSC. Both wells -- Dara 3 & 4 targeted the Upper Pliocene sands which were plugged and abandoned as gas discoveries.

The Dara 3 well was drilled to a depth of 3,182 feet (970 meters) and intersected net gas pay of 59 feet (18 meters). Dara 3 was successfully flow tested at a rate of 9 milion standard cubic feet per day (MMscf/d) with 1.9 percent CO2 and no water. The nearby Dara 4 well was drilled to a depth of 2,526 feet (770 meters) and intersected net gas pay of 19.7 feet (6 meters). In 2015, the East Dara gas discovery was independently assessed by a third party to contain 734 Bcf of gas.

Judiana stated “the objective of drilling one or two more appraisal wells in East Dara is to prove the commercial viability of the Pliocene shallow gas play”. Judiana noted that “the East Dara gas discovery was analogous to Chevron’s shallow AB gas fields in the Netherlands”. Judiana explained further that “Chevron had successfully developed the offshore Netherlands AB gas fields despite the shallow depth and low relief of the structures, the unconsolidated nature of the reservoir sands, together with difficulties modelling reservoir architecture and predicting water breakthrough. The AB gas fields were developed employing highly-deviated wells completed with expandable sand screens after gaining an understanding of sequence stratigraphic and glacial controls on sand quality and deposition”.

Judiana further added that “the Company had already studied a number of commercialization options for the East Dara gas field which included a tie-in to the West Natuna pipeline system, a new-build pipeline to Natuna Island and a floating liquefied natural gas (FLNG) vessel, and the Company has determined a FLNG solution provided the best commercial and operational results”.

Judiana explained “the Company had completed a Preliminary Plan of Development by a 3rd party for the East Dara gas field confirming robust economics utilizing:

  • Up to 14 development wells phased over field life
  • Four unmanned Well Head Platforms (WHP)
  • Infield umbilicals and flowlines
  • Leased FLNG facility to support 11 years of production/throughput at 110 MMscf/d plateau with 18 year production life
  • Export via LNG tanker to the Indonesian domestic gas market"

Judiana mentioned that “further pre-FEED/FEED work was needed to finalize this Preliminary Plan of Development”.

Judiana indicated that “the targeted gas market for East Dara gas was the Indonesian domestic market given the growing demand for gas, the planned new build regas FLNG infrastructure and the favorable gas prices”. He also mentioned that some discussions have already been initiated with local gas Buyers/Offtakers.

Judiana stated that “the Company was actively looking for Parties to progress the East Dara gas development and hoped a transaction would be concluded soon so Pre-FEED/FEED and other appraisal/development activities could be started”.

Exploration Activities During a Challenging Time

Commenting on the current situation in the oil & gas industry, Judiana said that whilst it is indeed difficult to justify undertaking exploration activities due to low oil prices, at the same time it is actually an opportune time to continue low risk exploration activities since service companies’ costs have significantly decreased.

Judiana recognized that inter-ministerial coordination and involvement by Parliament would likely be required to obtain tax and fiscal incentives to spur exploration and other activities which may take some time. Meanwhile, Judiana suggested the Migas/SKK Migas consider some easier solutions such as revising certain existing rules and regulations to give companies more freedom and flexibility in executing their exploration activities. Some examples cited by Judiana included: eliminating entirely or significantly reducing tendering requirements under PTK 007 for exploration activities (have a separate procurement regulation solely for exploration companies); allowing exploration companies to sell its surplus materials to recover any costs incurred on a dry-hole/unsuccessful well; allowing the sale and transfer of surplus materials between PSCs at market value rather than book value to procure goods faster, simplifying data access including from overseas, and simplifying the relinquishment process. All of these potential changes do not require inter-ministerial or Parliament involvement and could be undertaken quickly which in turn may attract exploration activity whilst the broader Government is working on better tax and fiscal incentives. Furthermore, none of these changes impact the Governments’ revenue.

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