Australian oil and gas company Carnarvon Petroleum has informed that Advance Energy has, subject to shareholder approval, raised capital to acquire a 50% interest in Carnarvon's Buffalo project, in the Timor Sea, offshore East Timor, paving way for the start of drilling operations this year.
Carnarvon said that Advance Energy would fund the Buffalo-10 offshore well on a free carried basis up to a cap of US$20m.
"This means the drilling will be at no cost to Carnarvon unless the well costs more than US$20m. The transaction has been approved by the government of Timor-Leste. It is expected that the transaction will complete after Advance Energy receives shareholder approval, which is scheduled for mid-April 2021," Carnarvon said.
Carnarvon said it has also continued to make progress to drill the Buffalo-10 well this year. Tendering and procurement processes are already underway, including negotiations to secure a drilling rig.
Carnarvon Managing Director and CEO, Adrian Cook, said: “We congratulate Advance Energy on their capital raise and welcome them to this exciting project. The project team is well advanced in their work to drill the Buffalo-10 well in 2021. The well will be suspended so that it can be used for future production. Development plans will also be progressed this year so that it provides us with the opportunity to execute the planned operations to first oil in a short period of time. The Buffalo project is progressing well and looks to be positioned for a window in time where there are now forecasts of shortages of quality oil from projects like Buffalo”.
Carnarvon recently awarded the drilling management services contract to Petrofac, which will include completion of detailed well design, procurement of long-lead items, and contracting the drilling rig and associated services, including the shore base location for the project.
The objective is to drill the Buffalo-10 well in the second half of 2021, which will be the first step towards the redevelopment of the Buffalo oil field. The well is targeting the crest of the proven Buffalo oil field and will be suspended as a future production well.
In December 2020, Carnarvon announced a binding agreement with Advance, where Advance would acquire up to a 50% interest in the Buffalo project by funding the drilling of the Buffalo-10 well up to US$20m on a free carry basis. In addition to this, the newly formed joint venture will acquire development funding from third-party lenders and any additional funding requirements will be provided by Advance as an interest-free loan, Carnarvon said.
Carnarvon is targeting the FID for Buffalo in 2022 with first oil targeted for late 2023.
Buffalo background
Carnarvon was awarded the WA-523-P permit, which included the previously developed Buffalo field, in May 2016 for an initial six-year term. The field was discovered by BHP in 1996 and subsequently developed using four wells drilled from a small, unmanned wellhead platform installed in 25 meters water depth, tied back to an FPSO.
Production started in December 1999 at production rates up to approximately 50,000 stb/d and terminated in November 2004 after the production of 20.5 MMstb of highly-undersaturated, light oil (53°API) from the Jurassic-age Elang Formation. All existing facilities and wells were decommissioned and removed prior to Carnarvon being awarded the permit.
Carnarvon initially concentrated its technical work on reprocessing the 3D seismic dataset using full waveform inversion (FWI) technology.
"This work supports the interpretation of a significant attic oil accumulation remaining after the original development, based on sub-optimal positioning of early wells using poorly processed seismic data. Reservoir modeling has been conducted using the latest structural interpretation and available well data, including an extensive history-matching effort to calibrate model/well performance to production rates and water-cut development (governed by strong aquifer drive) observed during the original production period," the company said previously.
According to Carnarvon, independently audited volumetric estimates of contingent resources in the Buffalo oil field are 31.1 million barrels (2C) with low estimates of 15.3 million barrels (1C) and high estimates of 47.8 million barrels (3C).
The Buffalo project was originally located in Australian water, however, the governments of Australia and Timor-Leste signed a deal on maritime boundaries in 2018, that altered the maritime boundary between the two countries affecting the WA-523-P permit containing the Buffalo project. The WA-523-P exploration permit has now been split in two with a portion including the Buffalo oil field changing from its Australian jurisdiction to being exclusively in the East Timor jurisdiction.
According to Advance Energy, Buffalo PSC has the potential to deliver production of 40,000 bopd within three years of the B-10 Appraisal Well depending on the degree of success of the B-10 Appraisal Well.