Murphy Oil has made two additional discoveries on its acreage offshore Malaysia. The first discovery was made at the Siakap North prospect located in Block K, offshore Sabah, Malaysia.
Drilled by Diamond Offshore's Ocean Rover semisub, the Siakap North discovery is located 6 miles from Murphy's Kikeh field in approximately 4,300 feet of water. The well encountered oil bearing pay sands of a similar age and quality as Kikeh. Development options including a tieback to Kikeh are being evaluated. Murphy holds an 80% working interest and serves as operator. Petronas Carigali Sdn. Bhd., the wholly owned exploration and production arm of Petronas, holds the remaining 20%.
The second discovery was at the East Patricia prospect located in Block SK 309, offshore Sarawak, Malaysia. The well found approximately 230 feet of net natural gas pay and was drilled in 89 feet of water. East Patricia is located 23 miles from the Bintulu onshore gas receiving facility currently under construction for the sanctioned Sarawak natural gas development. Murphy maintains a 60% working interest and serves as operator. Petronas Carigali Sdn. Bhd. holds the remaining 40%.
"We are pleased with the well results and hope to tie these discoveries into our nearby major fields in the future," stated David M. Wood, President and Chief Executive Officer. "These successes should contribute nicely to the continued growth of our Southeast Asian operations," he also added.
The most significant impact project Murphy has lies in deepwater Malaysia offshore Sabah. After a rocky beginning, with announced dry holes at the Bagang and Bliais prospects, Murphy achieved tremendous success at the Kikeh prospect (80%). Located in 4,400 feet of water, the Kikeh discovery lies in the southern part of Block K and is the first deepwater oil discovery ever made in Malaysia. The initial well found in excess of 500 net feet of oil pay and Murphy quickly moved to drill more wells to appraise the size of the structure. The average net pay of the three wells and two associated sidetracks was 400 to 600 feet. Furthermore, all oil pay sands appeared to be in communication and were full to base with oil. During 2003, a different well location on the Kikeh structure was drilled, cored, then production tested, to help further define both reserves and oil flow characteristics. A formal sanctioning of the $1.5 billion, 440 million barrel project was announced in 2004 and includes the tie-in of a nearby discovery at Kikeh Kecil.
The Kikeh development is being executed extremely well with the field expected to begin producing in the second half of 2007 -- an impressive five years after the discovery and within the original schedule. The topside modules have been installed on the FPSO and the SPAR is on location with the mating of the hull and topsides complete. A total of 20 producing wells have been drilled -- all of which were completed on schedule and on budget as the field is drilling out as envisioned. We expect the initial field production rate to be 40,000 barrels a day with a one year ramp up to plateau of 120,000 barrels a day, which will provide meaningful production growth for Murphy from the latter half of 2007 through 2008.
Murphy's initial success in Malaysia was offshore Sarawak in 2002 where its first well found the West Patricia field (85%), located approximately 25 miles from the coast. The field was quickly appraised and brought on stream within 18 months -- a record in Malaysia. West Patricia produces from a well jacket to a floating storage facility and continues to produce at levels above 20,000 barrels a day. The establishment of a production center at West Patricia will allow Murphy to fully develop its surrounding acreage, including the Congkak oil discovery which is already been routed through the facility as well as perhaps the Endau, Rompin and Permas discoveries yet to be fully appraised and sanctioned.
Murphy has also continued its string of successful exploration on our two blocks offshore Sarawak, adding natural gas discoveries to our growing inventory at Pemanis, Serandah, Gasing, Wangsa, Tiram and Sapih during 2006. Murphy has signed a Gas Sales Agreement to develop several of our discoveries. The project includes the development of several fields which will supply natural gas to a nearby LNG facility beginning in 2009. Production volumes are expected to be as high as 350 million cubic feet a day and cover up to 15 years. This project will complement our Kikeh oil production in Malaysia (see Offshore Sabah, Malaysia above) as well as West Patricia, and will serve as a predictable and low decline anchoring asset in our international portfolio.
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