Australia’s Santos and Carnarvon Petroleum are progressing as planned with the development of the Dorado project, located offshore Australia, despite recent challenges in the market. The partners are focusing on starting the project FEED as planned.
The giant Dorado development is located in permit WA-437-P. Santos is the operator and holds an 80% interest and Carnarvon is its partner with the remaining 20% interest.
Carnarvon said on Monday that its strategy had intentionally targeted projects that have the potential to produce in low-cost environments and thereby absorb extreme economic events such as we’re experiencing at present, namely, a dramatic global response to the spread of the COVID-19 virus and to the fall in oil prices.
The sheer size and nature of the Dorado field means that it is a strong and robust project which is expected to produce at globally competitive capital and operating costs per barrel, Carnarvon said.
On the Dorado field work, the Carnarvon team is working closely with the operator on a variety of components that are required to formerly enter the Front End Engineering and Design (FEED) phase. At this time there is nothing preventing the beginning of FEED nor its ongoing work throughout this and next year. This is a priority for Carnarvon and the recent global events have not affected this position, the company noted.
The exploration prospects around Dorado, such as Pavo and Apus, are looking attractive on the new Keraduren 3D seismic data. There are also new prospects showing up on the 3D seismic data.
Carnarvon is of the view that the current spot prices for oil do not represent longer term prices expected to be realized in ‘normal’ market conditions.
Carnarvon said: “The company has considered this situation carefully, particularly having regard to when the business expects first production from Dorado, and is confident that it makes sense to proceed with the businesses’ plans unchanged.”
Carnarvon’s Managing Director and Chief Executive Officer, Adrian Cook, said: “We have experienced market volatility in the past, such as with oil prices falling in 2015. During those times we also carefully assessed the situation and felt confident to remain active, working through the uncertainty and volatility that was present at the time.
“Taking this considered approach put the company in an incredibly strong position that resulted in the discovery of the Dorado field in 2018. We have once again taken the time to carefully assess market conditions. Our strong conviction is that the COVID-19 virus issue and low oil prices will be resolved in time. We are of the view that the most appropriate course of action at the current time is to continue to focus on the delivery of our plans, and that includes supporting the operator in advancing the Dorado development.
“Importantly, through careful management, we are in a position to proceed with our plans because of the very strong financial position of the Company. At 31 December 2019 we reported cash of $119 million. Since this time, we have been very prudent with our outlays and we will have more than enough financial resources available to cover our 2020 expenditure. Based on our current forecasts, we will also have more than enough to reach the Final Investment Decision for the Dorado liquids development.”
It is worth mentioning that Santos’ preferred concept for the Dorado project is an FPSO and wellhead platform development. In the initial phase, Santos plans for oil and condensate development followed by future phase of gas export.
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