Carnarvon Petroleum Limited
Buffalo field moves closer to production
Thursday, May 03, 2018
Carnarvon Petroleum Limited is pleased to announce that redevelopment of its Buffalo oil field in the Timor Sea is progressing as the Company advances plans to drill the first production well.


– Preparations underway to drill the Buffalo-10 production well

– Buffalo-10 will be positioned to confirm attic oil and will be completed as a production well

– The oil field is expected to have three production wells connected to a leased FPSO

– Strong Interest from industry supports Carnarvon’s confidence in the project

The signing of the Maritime Boundary Treaty (“Treaty”) by the Australian and Timor-Leste governments (refer to ASX announcement of 7 March 2018) has enabled Carnarvon to progress its Buffalo oil field re-development plans, commencing with the drilling of the Buffalo-10 well.

The Treaty means the Buffalo oil field will be completely 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).

The government meetings to date have demonstrated that the parties are aligned in wanting to achieve first oil as soon as practicable.

Carnarvon is extensively engaging with suppliers for the drilling of the Buffalo-10 well and the subsequent re-development of the field. This includes preparing the basis of well design (refer Figure 1 in link below), starting the process to obtain environmental approvals, identification of drilling rigs and commencing discussions with Floating Production, Storage and Offloading (FPSO) providers to determine availability of suitable facilities. In addition, the Company has commenced 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 a depth to reservoir of around 3,250 metres, the Buffalo-10 well is expected to take around 30 days to drill and complete with an extensive formation evaluation program. This will complement the geological knowledge from the previous oil field well intersections. Being in shallow water of only 25 metres, a cost effective jack-up rig will be used to drill the well.

As illustrated in Figures 2 and 3 (see link below), the field development consists of a well head platform connected to an FPSO vessel through a production pipeline and control umbilicals. The FPSO is expected to be leased in order to keep up front 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 commissioned an independent cost analysis of the field re-development with the report showing capital expenditure below US$150m (inclusive of the three production wells).

The annual operational costs were separately assessed in a range of US$80 to US$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 US$400m to US$500m.

The project is therefore deemed a low cost operation with total expenditure representing some US$18 to $21 per barrel. At current Brent oil prices of around US$73 per barrel the field is expected to generate around US$2.2 billion in revenue based on the 2C contingent resource of 31 million barrels (Refer ASX announcement of 28 August 2017).

Since 28 August 2017, further improvements in the seismic data quality over the Buffalo structure have been achieved. All interpretations on the further improved seismic data support the existence of the attic containing an undeveloped oil column of up to 60 metres, up-dip of the previously highest perforated interval in the field.

Carnarvon Chief Executive Officer, 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 31 March 2018), 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. As such Carnarvon intends to take a leading role in redeveloping the oil field.”

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