Primeline Energy Holdings announced that Primeline has entered into a turnkey drilling contract for its step out exploration well in the vicinity of the LS36-1 field as part of its rolling development and exploration program.
As previously announced on February 10, having made good progress on the development of its LS36-1 gas field, Primeline signed a Letter of Intent with China Oilfield Services Ltd. (COSL) under which COSL agreed to drill LS35-3-1 well on a turnkey basis for Primeline. Primeline has now concluded the detailed negotiations and, on 5th March 2010, entered into the turnkey drilling contract with COSL.
Under the turnkey drilling contract, COSL will drill the LS35-3-1 well in Block 25/34 using a jackup rig, COSL 942, once the rig is released from its current contract, which is expected to be sometime between the beginning of April to late May 2010. COSL will supply all necessary equipment, services and personnel for the drilling.
The LS35-3 prospect is approximately 14.5 km from the existing LS36-1 discovery and is one of four main channel system prospects Primeline identified in the area adjacent to the LS36-1 Gas Field through its 3D seismic program in 2007. If any sizeable hydrocarbon resources are discovered at LS35-3, they can be easily tied into the proposed production facility Primeline and CNOOC plan to build as part of the LS 36-1 gas field development program. Primeline also has another ready to drill prospect to the north of the LS36-1 field.
Based on the Turnkey Drilling Contract, the cost of the well, in a success case, is expected to be approximately US $25 million depending on the level of testing required. This price is significantly less than prices which were quoted to Primeline in 2008/2009. The cost of the exploration well will be borne by Primeline and Primeline Petroleum Corporation, a company 100% owned by Chairman Victor Hwang, in the proportions 75/25, representing their respective interests in the Petroleum Contract.
Primeline obtained confirmation from its major shareholder and Chairman, Victor Hwang, that he will underwrite the cost of the drilling contract in order to enable Primeline to secure the rig. Primeline is in the process of putting in place arrangements for raising the funds required for its share of the drilling cost. Further details will be announced when the rig is ready to be mobilized to LS35-3-1 location and arrangements for the fund raising have been finalized.
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