Wood Mackenzie: Timor Sea decision near

Decision time is drawing near for development of substantial discoveries in the Zone of Cooperation Area (ZOCA) of the Timor Sea.

Industry is exploring ZOCA under a treaty between Australia and Indonesia.

"Exploration in ZOCA has resulted in a mixed bag of success and failure," said Wood Mackenzie Consultants Ltd., Edinburgh.

"Unfortunately, failures have tended to be big, and successes have been limited with a distinct gas bias.

"Given the size and remoteness of the finds, it is perhaps not surprising the commercial viability of these discoveries has yet to be established."

Most production sharing contracts in the zone have passed beyond the obligatory exploration stage, so drill-or-drop decisions are expected to occur every year.

"Many of the more obvious features have been tested," Wood Mackenzie said. "Contractors may have to look closer at more unconventional plays to generate success. Given results to date, however, it is perhaps safe to assume that more surprises are in store."

Exploration successes

Industry drilled four wells in what was then known as the Timor Gap in the 1970s and two more in the mid-1980s. The spate of exploration following the ZOCA agreement between the two governments started in 1993.

The first of the recent wells was a dry hole, Marathon Oil Co. 1 Hydra.

The first strike, apparently commercial, was BHP Petroleum Pty. Ltd. 1 Elang, drilled in 1994 on Block 91-12 in ZOCA's Area A. It flowed at a maximum stabilized rate of 5,800 b/d of 57 gravity oil from a 61 m interval at 3,000 m.

BHP's Elang-2 appraisal well, also drilled later in 1994, flowed 6,080 b/d and 7,500 b/d of 55 gravity oil from two intervals.

Two other wells on the block were oil strikes: 1 Kakatua, drilled in December 1994, flowed at a combined stabilized rate of 9,000 b/d of 53 gravity oil, and 1 West Elang flowed 1,600 b/d of 40 gravity oil.

A Phillips Petroleum Co. group's 1 Bayu wildcat, drilled on Block 91-13 of Area A in January 1995, flowed a combined 90 MMcfd of gas and 5,250 b/d of condensate through a 1 in. choke on four drillstem tests.

A Phillips subsidiary early this year agreed to buy a 22.5% interest in Bayu field from a unit of Parker & Parsley Petroleum Co., Midland, Tex. The trade would boost Phillips' interest to 60% (see map, Apr. 8, p. 26).

In the latest action, Phillips' 3 Bayu appraisal well cut a thin hydrocarbon section on the east flank of the field. Drilled to 10,417 ft, the $6.5 million hole was abandoned without testing.

"Taken with the results of wells drilled by others on an adjacent block, our drilling program has confirmed Bayu field has significant potential for development," said Knut Am, Phillips senior vice-president for exploration and production.

In June 1995, BHP spudded its 1 Undan wildcat in the south part of Block 91-12. It flowed gas and condensate on two drillstem tests. The first flowed 22.1 MMcfd and 1,640 b/d through a 1/2 in. choke. The second flowed 42.2 MMcfd and 2,290 b/d through a 1 in. choke.

Further appraisal showed that Phillips' Bayu and BHP's Undan wells are on the same structure.

Wood Mackenzie said Phillips and BHP plan a joint 3D seismic survey in October to help determine reserves, drillsites, and unitization.

Following signing of the ZOCA treaty in 1989, industry committed to drill 23 wells under original exploration licenses. Because of program deferrals and permit withdrawals, industry drilled only 17 wells during a 3 year exploration phase.

ZOCA exploration peaked in 1994 with 11 wildcats and one appraisal well drilled. In 1995, five wildcats and three appraisal wells were drilled.

Wood Mackenzie believes industry will drill six wildcats and six appraisal wells. The forecast for 1997 is nine wildcats and three appraisal wells.

Elang options

Wood Mackenzie said estimates of Elang reserves were trimmed with increased knowledge of the reservoir. Elang is now estimated to hold reserves of 15-20 million bbl of oil.

Kakatua reserves discovery are estimated at 5-10 million bbl of oil, based on one well and 3D seismic data. West Elang holds an estimated 1-2 million bbl of oil "...although the accumulation is of dubious commerciality."

BHP has proposed developing Elang using a production, storage, and offloading vessel currently deployed in Skua field, with Kakatua to be developed as a satellite tied back by a flow line.

But Wood Mackenzie said poor results from the 1 West Elang and 3 Elang wells made project economics "less than marginal." A decision on development is not expected soon, although engineering studies will continue.

The analyst said preliminary development plans call for use of only three production wells: 1 and 2 Elang and 1 Kakatua. A further Elang well could be reentered and completed as a horizontal producer.

"As a result," Wood Mackenzie said, "capital expenditure may be limited to the cost of a few flow lines and subsea completions. If all goes to plan, the (Elang/Kakatua) find could be on stream during second half 1997."

The analyst said that, assuming Elang/Kakatua reserves of 26 million bbl of oil, production would peak at 22,000 b/d and field life would be 6 years.

Undan/Bayu plan

Estimated reserves for the Undan/ Bayu structure are pegged at 3-5 tcf of gas, while condensate reserves are estimated at 150-250 million bbl. Wood Mackenzie said the Undan side of the structure is larger than Bayu, with an estimated 50-60% of reserves lying under the BHP block.

Most of Undan/Bayu's appraisal drilling and seismic interpretation is expected to be complete by midyear, which the analyst said would allow some form of development decision to be made by December.

Wood Mackenzie said, "Phillips is thought to favor construction of a fixed offshore facility with a two train, 4 million metric ton/year greenfield liquefied natural gas (LNG) plant onshore near Darwin."

As operator of the world's first Pacific based LNG project at Kenai, Alaska, Phillips has a proprietary conversion method, called Cascade, "that may enhance the commercial viability of such a small scale project."

The LNG plant proposal opens the possibility of a large LNG export project to include development of other discoveries in the area.

Besides Undan/Bayu, Wood Mackenzie said, candidates for development as gas supply sources are the Petrel and Tern discoveries operated by Santos Ltd., Sydney, in Australia's South Bonaparte basin and the Sunrise and Troubadour discoveries, operated by Woodside Offshore Petroleum Pty. Ltd., Perth, in the North Bonaparte basin.