Karoon Gas Australia Ltd has been given the approval for the revised appraisal plan (PAD) for five blocks in the Santos Basin, offshore Brazil.
The approval was given by the Brazilian oil and gas regulator, the Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP).
Karoon owns 65% stakes in S‐M‐1037, S‐M‐1101, S‐M‐1102, S‐M‐1165 and S‐M‐1166 blocks located in the Santos basin, and Pacific Exploration and Production (formerly Pacific Rubiales Energy Corp.) owns the remaining 35% equity interest in the blocks.
“The revised PAD specifies the minimum firm and contingent work program commitments required to be completed to satisfy the joint venture’s obligations under the concession agreement. This is an important milestone for Karoon as it paves the way for the joint venture to finalise and prepare for the forward work program in the Santos Basin Brazil,” the company has said in the press release.
The company says that the appraisal drilling of the Echidna and Kangaroo light oil discoveries is expected to provide greater resource certainty. Furthermore, while the firm work program commitments are to be completed by December 31, 2018, Karoon expects to begin the appraisal drilling of the Echidna light oil discovery during 2016.
Two wells expected to be drilled in the Emu / Echidna area
Karoon notes that the PAD provides significant flexibility with respect to the timing of capital expenditure to the company. The Australian oil and gas company expects to install an Early Production System (EPS) on the Echidna field contingent upon continued appraisal drill success at Echidna.
“An EPS will likely consist of two or more production wells which are expected to provide vital technical information about reservoir production performance and would form the basis for the start of a full field development. An EPS at Echidna would provide an important analogue for understanding Kangaroo and other similar oil accumulations in the blocks,” the company has said.
The company hopes that a new 3D seismic survey included in the PAD would allow better risking and ranking of other prospects in the blocks. Karoon expects that, upon exploration and appraisal success, an additional resource would be tied back to a centrally located floating production, storage and off‐loading vessel. The company also said that there was significant flexibility with respect to timing and location for the forward drilling program.
Karoon’s Managing Director, Robert Hosking said: “The approval of the revised PAD is significant for the company. Karoon is now in a position to move forward and contract a drilling rig to commence the next iteration of the work program during 2016. With a robust balance sheet, Karoon is well positioned to take advantage of the current low oil price environment and benefit from falling development and operating costs.”
“The forward appraisal drilling of the material Echidna and Kangaroo light oil discoveries is an exciting next step for the company, and success could lead to early production which would also bring cash flows.”
“The Board is excited about the 2016 work program and appraisal success at Echidna and Kangaroo will underwrite Karoon’s ambitions of transitioning into a development and production company.”
Key elements of the revised PAD
According to the revised PAD, all firm commitments are to be completed by December 31, 2018. Under firm commitments, the company expects to drill two wells in the Emu/Echidna area. Also to be completed by the end of 2018 is acquiring and processing 3D seismic survey over the full PAD acreage and pre-stacking depth migration of data in 2-millisecond frequency, as well as further process 2ms data to increase frequency/resolution.
Under contingent work program period, which will start on January 1, 2019, the company expects to drill up to four contingent wells. Each contingent well drilled will result in a 6-month extension to the contingent period. Therefore, if one well is drilled, the contingent work period will extend until of June 30, 2019. If all four wells are drilled then the contingent work program period will extend until December 31, 2020.