Following a detailed technical and commercial review, the BMG Joint Venture ("BMG JV") has taken a number of initiatives to revise the development plan and schedule for the ROC-operated BMG Project which has resulted in substantial project cost savings. In 2009 and 2010, the BMG JV will focus on enhancing the production performance of the Phase-1 oil project. Development commitments for the Phase-2 gas project have been reduced in 2009.
2009 Drilling Program
The 2009 drill rig program has been significantly reduced through the assignment of BMG JV commitments for the Kan Tan IV rig and a recently completed rig swap with Shell Development (Australia) Pty Limited, under which the Songa Venus rig has been "swapped" for the Ocean Patriot rig. These actions have reduced BMG JV cost commitments in 2009 by over US $100 million and provided a more flexible drilling program for the project.
Through assignments to existing consortium members, the Kan Tan IV rig commitment has been reduced from 143 days (beginning in March 2009) to 30 days in late 2010.
The Songa Venus rig was contracted in July 2008 to drill development wells on the BMG field in early 2009. The rig swap for the Ocean Patriot, which is currently located in Bass Strait, has removed substantial mobilzation costs associated with towing the Songa Venus rig from the Timor Sea to Bass Strait and allows for better management of operational risks.
The Ocean Patriot rig program provides the BMG JV with the option to undertake operational work-overs on existing B3 and B5 wells and the option to drill and complete the B7 development well; activities planned to improve production performance in 2009 and 2010. The 60-90 day Ocean Patriot work program on the BMG fields is planned to begin in May 2009. In addition to the rig move savings, further cost savings could be generated by assigning the rig to third parties.
Gas flaring conditions for the BMG Project have been revised to allow production to continue while modifications are made to the Crystal Ocean FPSO that will remove the need for flaring during normal operations.
The limit for the total volume of gas flaring remains unchanged. The requirement for gas flaring to cease by March 16, 2009 has been removed.
New topside facilities on the Crystal Ocean will include a low pressure flare recovery compressor package to supplement the reinjection of produced gas. The BMG JV anticipates that work on the upgrade of the Crystal Ocean facilities will be completed during 4Q09, before the gas flaring volume limit is reached. The total cost for the installation and commissioning of the new facilities will be approximately A$10 million. Until completion of the upgrade, flaring volumes will remain well below the allowable daily average rate.
Participating interests in the BMG Joint Venture are as follows:
Commenting on these operational issues, ROC's Chief Executive Officer, Bruce Clement, stated, "The changes to the development plan and schedule for 2009 implemented by the Joint Venture are aimed at reducing overall development costs for the BMG project and ensuring that investments for the project are being carefully managed in this period of lower oil prices and disrupted financial markets. In this regard, ROC in its capacity as operator has worked with the Joint Venture to achieve a very positive outcome.
"ROC's approach to the BMG project is consistent with its approach to investments across the Company's portfolio of development and exploration assets, which is to carefully steward financial resources and to ensure optimal commercial returns are achieved from each of its assets."
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