Australian oil exploration company Carnarvon Petroleum has revealed plans for drilling of the first production well on its Buffalo oil field redevelopment project in the Timor Sea.
The first step in the redevelopment is the drilling of the Buffalo-10 well.
The Treaty means the Buffalo oil field will be entirely within Timor-Leste jurisdiction, with Carnarvon already establishing an office in Dili, appointing a specialist Timor-Leste advisor and initiating a series of meetings with the Timor-Leste government agency Autoridade Nacional do Petróleo e Minerais (ANPM).
Carnarvon said on Thursday that it was engaging with suppliers for the drilling of the Buffalo-10 well and the subsequent redevelopment of the field.
This includes preparing the basis of well design, starting the process to obtain environmental approvals, identification of drilling rigs, and beginning discussions with FPSO providers to determine the availability of suitable facilities.
Also, the company began the process of resourcing staff and contractors needed to operate drilling and subsequent production.
The Buffalo-10 well is intended to be the first production well in the oil field redevelopment, positioned to test the new oil in the attic accumulation as well as drill deeper into the oil pool in the previously developed portion of the field.
The previously developed portion of the oil field was producing at around 4,000 barrels of oil per day when the field was shut in.
With depth to the reservoir of around 3,250 meters, the Buffalo-10 well is expected to take about 30 days to drill and complete with an extensive formation evaluation program. Being in shallow water of only 25 meters, a jack-up rig will be used to drill the well.
The field development consists of a wellhead platform connected to an FPSO vessel through a production pipeline and control umbilicals. The FPSO is expected to be leased to keep upfront capital costs to a minimum. Three wells are expected to produce the estimated 31 million barrels of oil over a period of around five years.
Carnarvon added that it commissioned an independent cost analysis of the field re-development with the report showing capital expenditure below $150 million, inclusive of the three production wells.
The annual operational costs were assessed in a range of $80 to $100m per annum, on the basis the field has a production life of around five years. This means the total operational expenditure of the project is expected to be between $400m to $500m.
“The project is deemed a low-cost operation with total expenditure representing some $18 to $21 per barrel. At current Brent oil prices of around $73 per barrel the field is expected to generate around $2.2 billion in revenue based on the 2C contingent resource of 31 million barrels,” the company said.
Carnarvon CEO, Adrian Cook, said: “The low capital and operating costs mean this is a very high yielding, standout project at current oil prices. It is a project capable of supporting a mix of funding alternatives which could naturally include a portion of Carnarvon’s current cash ($48 million reported at March 31), debt funding and partner and industry funding where interest is very strong.
“The nature of the project is also well suited to Carnarvon in terms of its scale, time to first production and overall risk profile.”