Oilex (AIM:OEX) said ‘substantial progress’ has been made towards regaining a participating interest in the West Kampar PSC in Indonesia in order to restart production at the Pendalian Oilfield.
The West Kampar PSC (“West Kampar” or “PSC”) covering some 900 square kilometres, is located in central Sumatra, adjacent to the most prolific oil producing basin in Indonesia.
The dual-listed group said the Government of Indonesia (“GoI”) has declared the group’s Proposed Direct Bid as ‘administratively complete’ and has recorded it as a proposal for a Direct Offer through a Joint Study as stipulated in ESDM Regulation No. 35 of 2008.
This confirmation from the GoI, which is exclusive to Oilex, provides a pathway to conduct the Joint Study on the proposed development of West Kampar which will then provide certain preferential rights in the ultimate award of the West Kampar PSC by the GoI to Oilex.
Oilex's interest in the study and ultimate potential award of the PSC will be on a 50-50 joint basis with its local Indonesian partner, PT Ephindo, this morning’s statement detailed.
Shares in Oilex opened up 4.5% on the news.
In 2007, Oilex farmed into the West Kampar PSC for a 45% Participating Interest alongside the operator for the joint venture, PT Sumatera Persada Energi (SPE).
That same year, both parties in the joint venture successfully drilled an appraisal well on the earlier discovered Pendalian Oilfield which confirmed oil flow at commercial rates, it said.
Due to increasing concerns related to the operator's performance, Oilex terminated its second farm in in 2009, requesting repayment of the relevant funds and commencing arbitration against SPE's parent company in the ICC International Court of Arbitration.
Later in 2018, the GoI elected to withdraw the PSC following which Oilex made several representations in support of its application to be re-awarded the PSC and to restart production from Pendalian and re-evaluate the exploration potential of the West Kampar.
“Technical work carried out by Oilex and its advisors estimate that the field can be quickly brought back online at 350 to 400 bopd and that significant additional production potential may be possible from infill drilling and also water injection support,” said Managing Director, Joe Salomon.
The group said a return to production will require careful execution in the field given that it has been shut in since 2016 and that it believes previous production costs can be reduced.
It said the oil occurs in ‘five good quality, stacked reservoirs with some stratigraphic complexity’ and that recently acquired 3D seismic data should provide a significant improvement to understand the reservoir distribution and future development planning.
“A number of exploration opportunities are present both close to the Pendalian field and in the more distant parts of the block, these require further review evaluation,” added Salomon.
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