Aussie, Timor-Leste regulators terminate Timor Gap permit

Regulators in Australia and Timor-Leste have now formally terminated Timor Gap production-sharing contract JPDA 06-103, which leaves Australian companies Pan Pacific Petroleum NL (PPP), Sydney, and Oilex Ltd., Perth, in breach of their obligations and facing a possible financial liability.

Autoridade Nacional do Petroleo (ANP), the designated authority of the Joint Petroleum Development Area, issued the termination notice this week with the approval of joint commissioners for Australia and Timor-Leste after warning the joint venture last May (OGJ Online, May 16, 2015).

The PSC was signed in November 2006. Oilex with 10% interest was operator. Others in the consortium were PPP 15%, Japan Energy Corp. 15%, Gujarat State Petroleum 20%, Videocon 20%, and Bharat PetroResources Ltd. 20%.

The termination results from the JV’s breach of the terms of the PSC, including the failure to meet the minimum exploration work program commitments. These included the drilling of at least one exploration well, which had been nominated as Bazarete-1.

There could be a financial requirement to pay about $17 million to cover the cost of exploration activities not carried out.

The JV had previously requested credit for $56 million of excess expenditure on the approved work program, but ANP refused.

The Oilex group did drill two wells in 2009, but these were plugged and abandoned. When the PSC was first suspended in 2013, Oilex had been trying to secure the Stena Clyde semisubmersible rig to fulfil the requirements, but souring relations between Australia and Timor-Leste at the time prompted the decision to leave the permit.

Oilex cited increased sovereign risk as Timor-Leste attempted to nullify the maritime treaty between it and Australia.

Timor-Leste rejected this as an excuse to avoid contractural obligations, adding it had been more than patient with the Oilex group.

The PSC area has now reverted to vacant acreage.