Coro’s South-East Asia portfolio
Coro holds interests in two PSCs offshore Indonesia: 42.5% working interest (WI) in the Bulu PSC in the East Java Basin with KrisEnergy (42.5% and operator) and Satria Group (15%), and 15% working interest in the Duyung PSC in the West Natuna Basin with West Natuna Exploration (WNEL) (85%) – WNEL shareholders are Singapore’s Conrad Petroleum (90%) and Empyrean Energy (10%).
Bulu PSC: Entry to South-East Asia
Coro entered South-East Asia in 2018 with the acquisition of a 42.5% WI in the Bulu PSC in the East Java Basin. The PSC covers an area of 697km2 and holds three separate areas, A, B and C. Bulu Area A contains the Lengo gas field, independently assessed in 2014 to hold 2C resources of 359bcf by Netherlands, Sewell and Associates.
The East Java Basin covers the north-east side of Java and extends along the northern parts of the islands of Bali, Lombok and Sumbawa and into offshore waters. The basin has a complex tectonic history and is comprised of a series of north-east/south-west (NE-SW) trending troughs separated by ridges and arches. The basin contains significant accumulations of carbonates that form large petroleum reservoirs. From the Eocene to early Oligocene, a marine transgression associated with increased subsidence flooded the area and marine carbonates were deposited across the region. Rifting ceased in the early Miocene, and most of the carbonate mounds were drowned as a result of a rise in sea level. Exploration in East Java has a long history dating from the late 19th century and the onshore and shallow offshore areas are now well established with extensive infrastructure.
Exhibit 9: Bulu PSC location
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Lengo was discovered in 2008 by the Lengo-1 exploration well, drilled by the previous operator, Mubadala, and appraised in 2013 with a second well, Lengo-2, which was located more centrally on the structure. The field is in shallow waters of 60m and is a four-way dip structure defined on good quality 3D seismic acquired in 2008. The reservoir is the late Oligocene-early Miocene Kujung formation carbonate build-up, consisting of an upper, poorer quality section, and a lower high-quality section. An open-hole test across the entire Kujung I interval produced at 12.9mmscfd in Lengo-1 and 20.6mmscfd in Lengo-2. Pressures recorded from these drill stem tests and modular dynamic tester wireline samples indicate a gas-water contact (GWC) at 780m true vertical depth (TVD). The produced gas contains 34% of inert gases, of which 20% is N2 and 14% is CO2.
The Lengo field development plan was approved in 2014 and consists of an unmanned wellhead platform with four production wells. First gas is expected around 24 months after FID and a plateau rate of 70mmscfd is planned. The produced gas will be exported untreated through a 65km pipeline to shore and a further 5km overland to an onshore receiving facility, where the gas will be dried through minimal gas processing facilities. Compression will be required later.
FEED study and qualification has been completed and there is a Memorandum of Understanding in place for gas sales. A GSA has still to be approved. Progress on the project has been delayed while the field operator, KrisEnergy, undergoes restructuring, having filed for a moratorium in August 2019. Coro’s expectation was to conclude the GSA in Q419; however, there is a risk of potential delays given the operator’s current situation. We account for this potential risk in our valuation by attributing a 5% lower chance of success for Lengo compared to Mako, which corresponds to around a one-year delay in project development. An update on KrisEnergy restructuring process should be announced by 14 November 2019, the end of the moratorium period.
Duyung PSC: 276bcf field and drilling campaign underway
Coro quickly built on its position in Indonesia with the acquisition of a 15% WI in the Duyung PSC in February 2019. Duyung sits in the West Natuna basin and contains the 276bcf shallow gas Mako field alongside low-risk exploration step-out potential. A two-well exploration and appraisal programme is underway with the first well, Tambak-2, having successfully appraised the southern area of the field. Mako is 440km from Singapore and is only 16km from the Kerisi platform, the nearest tie-in point to the West Natuna Pipeline System, which delivers gas from Indonesia to Singapore.
Exhibit 10: West Natuna and Malay basin infrastructure
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The West Natuna Basin is the south-eastern extension of the Malay Graben and, as in the East Java Basin, there is a complex tectonic history. The basin was formed in the Late Eocene–Early Oligocene with an extension caused by the break-up of the Sunda Platform. The extension caused the formation of a series of NE-SW grabens, which eventually coalesced into three major half grabens and the Duyung PSC sits over the largest of these: the Bawal Graben. During the Early Miocene, a period of regional compression resulted in the development of NE-SW trending anticlines and uplifts that characterise the West Natuna Basin.
The primary reservoir target in the Mako field, the intra-Muda sands, were deposited in a marginal marine delta plain setting and exhibit high porosities due to the unconsolidated nature of the sands. These sands were originally considered to be a shallow gas hazard while drilling wells targeting the deeper Gabus reservoirs, so that, although four wells have penetrated the field to date, not a lot of data were historically gathered in the intra-Muda sands. The intra-Muda is sealed within the Muda Formation, which is a thick regional claystone sequence.
Exploration began in the basin in the late 1960s and in 1975 the first well on the Mako structure, Tengirri-1, intersected gas sands in the intra-Muda.
Exhibit 11: Mako field anticline
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The Mako field is a large low-relief structure that forms an elongate, NE-SW trending four-way dip closed anticline. The structure is 47km long and 16km wide and has c 350km2 closure above the GWC. The field sits in shallow waters of c 90m and the reservoir is also shallow, with a GWC of 391m TVD. The commercial viability of the field was demonstrated in 2017 with the drilling of Mako South-1. The well was cored, logged and tested, flowing dry gas at 10.8mmscfd with a CO2 content of 3.3%. The sands have an average porosity of 25% and multi-Darcy permeability of up to 4 Darcy. Mako was independently assessed to contain 2C resources of 276bcf by Gaffney, Cline and Associates in 2018. The low pressure and unconsolidated sands will require pressure optimisation to maximise recovery and effective sand control measures. A plan of development has been approved and a set of heads of agreement for Mako gas was signed with a Singaporean buyer in 2018.
Drilling programme: Mako step out appraisal and 250bcf exploration target
A series of prospects have been mapped both above and below the Mako field, and one of these will be tested as part of a two-well drilling campaign in 2019 that has also appraised the intra-Muda sands.
The first well, Tambak-2, was drilled in October 2019 to evaluate the reservoir properties and deliverability of the intra-Muda sandstones in the southern area of the Mako field. This was the most southerly test of the Mako field and is a step-out of over 13.5km from Mako South-1. The intra-Muda sandstone reservoir was encountered on prognosis at a depth of 381m and a gross gas interval of 10m was identified. Log data have confirmed the upper sandstone unit is of better quality than expected, with excellent porosity and permeabilities of 200mD to 3D across the best quality zone. The GWC and pressure data have been interpreted to be the same as seen in Mako-South-1, demonstrating the presence of a continuous gas-bearing reservoir in Mako across a large distance.
The company then tried to carry out a drill stem test (DST) in Tambak-2, but was unsuccessful over two separate attempts due to the reservoir being damaged as a result of well control operations. The well had kicked during attempts to isolate the gas-bearing reservoir with a bridge plug, and gas flowed to surface. Heavy barite mud was then used to control the well, which plugged and damaged the reservoir formation.
Even without a successful DST, Tambak-2 has demonstrated the presence of a good-quality gas bearing reservoir that can flow gas to surface, and which has the same GWC and pressure system as Mako South-1. Coro believes that this will be sufficient to increase the contingent resources of the field. Prior to drilling the well the company estimated that, if successful, up to c 100bcf of gross contingent resources could be moved from 3C to 2C.
Exhibit 12: Mako schematic: Tambak-1 and Tambak-2 locations
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Exhibit 13: Lower Gabus structure map, and Tambak-1 well location
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Exhibit 12: Mako schematic: Tambak-1 and Tambak-2 locations
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Exhibit 13: Lower Gabus structure map, and Tambak-1 well location
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Following on from the drilling of Tambak-2, the Asian Endeavour-1 jack-up moved to the central area of the Mako field and spudded Tambak-1 in early November 2019. The well is designed to appraise the intra-Muda sands, before drilling on to an expected TD of 1,370m to evaluate the Lower Gabus reservoir in the Tambak prospect. A key objective of the appraisal element of the well was to locate the edge of the gas accumulation by finding the GWC in the intra-Muda to confirm the upper limit of resources in the reservoir. At the time of writing, the well has been drilled through the intra-Muda to an intermediate depth of 513m and the sands have been evaluated with logs, a pressure survey, and fluid and gas samples. The top of the reservoir was encountered on prognosis at 389m and the intra-Muda sands were found to be better developed than expected, with a 5.2m thick upper unit showing excellent porosities and permeabilities. In addition, the lower sandstone unit was 20m thick (cf 7.3m in Mako South-1), providing upside potential.
Pressure data have confirmed that Tambak-1 sits in the same pressure system as Mako South-1 and Tambak-2, while the reservoir gas samples have confirmed the same gas composition as seen in Mako South-1, and these data support the company’s large, areally extensive single tank model for the field. The GWC was also encountered in the well and found to be 1.5m deeper than inferred from Mako South-1 and Tambak-2. The well will now be drilled to test the Tambak prospect.
Tambak is a three-way dip closed inverted anticlinal structure, with a closure of approximately 15km2. The Lower Gabus is the classic West Natuna basin play and nearby analogue fields include Kerisi, Anoa Forel and KF. Previous wells targeting the Lower Gabus in the block failed; however, the Tambak prospect demonstrates amplitude brights that are conformable with the structure, whereas the other structures do not. Coro has assigned a 45% technical chance of success to the Lower Gabus and mid-case prospective resources of 250bcf. The company sees the presence of enough reservoir quality sands in the Lower Gabus as the key exploration risk here. The well is expected to take around 33 days to complete, including extensive testing, and will be plugged and abandoned, after which the rig will be demobilised.
The development plan envisages Mako being developed in two phases. Phase 1 will target a production rate of 90mmscfd from four horizontal development wells (three subsea wells and one platform well), producing through an unmanned minimal facilities platform. The gas will then be exported via an 8km pipeline to the Kerisi platform. A second phase will be required as the reservoir depletes to maintain the gas plateau period. An additional four subsea wells are expected, together with compression facilities.