Citic Suspends Lofin-2 Well in Seram PSC as a Potential Gas Producer

A successful well test commenced May 21 and was conducted as a multi-rate test using different choke sizes to maximise reservoir information over a 7 day period. On a 52/64 inch choke the well flowed gas at approximately 17.8 MMcf/d with approximately 2,634 barrels per day (bpd) water and completion fluid and approximately 54 bpd of 34.9 degree API condensate/oil with a flowing wellhead pressure of 2,250 pounds per square inch (psi) (96 hour flow period on 52/64 inch choke). On the smallest choke setting (16/64 inch) the well was flowing gas at approximately 4.95 MMcf/d with approximately 12 barrels condensate/oil and approximately 280 bpd water with a flowing wellhead pressure of 5,000 psi (12 hour flow period on 16/64 inch choke).

The results indicate well flow was occurring around the stuck drill pipe and the presence of water in the test is interpreted to come from the lower part of the well coincident with a decrease in gas readings while drilling from around 18,356 feet (5,595 meters) MD (17,923 feet or 5,463 meters ssTVD) to total depth. It is likely the water can be isolated successfully (or not penetrated in future wells), in which case gas flow rates would be anticipated to be significantly higher than rates measured in Lofin-2. Initial analysis indicates the gas in the Lofin structure has minimal contaminants (<5 percent).

Following the completion of the test, the Operator, CITIC Seram Energy Ltd, acting independently, elected to proceed with further attempts to recover the stuck drill string, successfully recovering approximately 673 feet (205 meters) of the string. Further attempts to recover the remaining approximately 157 feet (48 meters) of stuck pipe at 17,257 feet (5,260 meters) MD were unsuccessful. The program to suspend the well as a potential future gas producer was commenced and completed with rig release July 19. The Lofin-2 results confirm a material gas discovery for the Lofin structure and evaluation of the comprehensive dataset acquired is continuing.

Well costs up to the commencement of well suspension have been approved to a value of $38.2 million (Lion share is around $0.955 million). Lion has paid sufficient funds via cash calls to date to have fully paid its share of the well to this Joint venture approved level, including an additional amount above this that should meet the company’s share of the cost to suspend the well.

Oseil-28 Well

Oseil-28 is a proposed infill development well located east of the recent successful Oseil-27 well in the Oseil-2 producing compartment. The well will be directionally drilled to target the Manusela fractured carbonate and is anticipated to take approximately 90 days (including mobilization) to complete. It is intended to recover undrained oil reserve of approximately 480,000 barrels in the northern part of the faulted 4-way dip closure of the Oseil-2 up-thrown fault block.

The well is the fifth well of the approved 10 well Phase 3 development plan. This has provided extremely positive results to date and is responsible for significantly increasing production from the Oseil field which is currently producing at approximately 3,430 bopd. The Phase 3 well program, plus production from existing wells, is expected to increase production to approximately 4,500 bopd based on forecasts prepared by the Operator. Economic evaluation was carried out on a 5.5 million barrels incremental reserves case anticipated from the Phase 3 program.

Following the drilling of Oseil-28 the plan is for the rig to drill the Oseil-22 location.