REG - Empyrean Energy PLC - Mako Gas Sale Key Terms Signed with PGN

Empyrean EnergyAnnouncement

28/03/2024 08:00

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RNS Number : 6746I  Empyrean Energy PLC  28 March 2024

This announcement contains inside information

 

Empyrean Energy Plc / Index: AIM / Epic: EME / Sector: Oil & Gas

 

Empyrean Energy plc

 

Mako Gas Sale Key Terms Signed with PGN & updated Mako Field Resources

 

28 March 2024

 

Empyrean Energy plc ("Empyrean" or the "Company"), the oil and gas development
company with interests in China, Indonesia and the United States, notes the
announcement released by Conrad Asia Energy Ltd ("Conrad" or the "Operator"),
the holder of a 76.5% operated interest in the Duyung Production Sharing
Contract (PSC), offshore Indonesia, in which Empyrean has an 8.5% interest.

Conrad has announced that it has entered into binding Key Terms for the sale
and purchase of the domestic portion of Mako gas ("Key Terms") with PT
Perusahaan Gas Negara Tbk ("PGN"), the gas subsidiary of PT Pertamina
(Persero), the national oil company of Indonesia. Under these binding Key
Terms, Conrad and PGN will agree in good faith and sign a fully termed Gas
Sales Agreement for the domestic portion of the gas produced from the Mako
field ("GSA") located in the Duyung Production Sharing Contract ("PSC") in the
West Natuna Sea, offshore Indonesia.

 

o  On 27 March 2024, Conrad and PGN entered into binding Key Terms thereby
committing to agree and to sign a GSA for the domestic portion of the gas
produced from the Mako field.

 

o  Under the Key Terms, the parties will conclude negotiations for and agree
in good faith a GSA that will include and be based upon the Key Terms. The
parties shall endeavor to sign such GSA by no later than 31 May 2024.

 

o  This GSA will be subject to the construction of the pipeline connecting
the West Natuna Transportation System ("WNTS") with the domestic gas market in
Batam. It forms part of the Domestic Market Obligation ("DMO") as set out in
the Mako's revised Plan of Development ("POD"). The sales volumes under this
GSA will represent approximately 29.5% of Mako sales gas volumes until the PSC
expires in January 2037(( 1  (#_ftn1) )).

 

o  The remainder of the Mako sales gas volumes will be sold to Singapore
where a term sheet was signed in 3Q 2023(( 2  (#_ftn2) ))  and Conrad is
moving towards finalising a GSA over the coming months.

 

o  These Key Terms are an important step towards the Mako development final
investment decision ("FID") planned by midyear 2024.

 

Empyrean CEO, Tom Kelly, commented:

 

'These Domestic Market Obligation key terms are an important step towards FID
for the Mako gas field development. The domestic sales are subject to a
pipeline spur being built connecting WNTS with Batam, and sales gas will be
sold into Singapore if the spur does not proceed or until it is completed.
This is another milestone for the project on the pathway to production.'

 

 

Duyung PSC - Update re Mako Gas Field Resources

 

In its Annual Report, Conrad also provided an update in respect of, inter
alia, Mako Gas Field reserves and resources as of 31 December 2023 following
of an updated reserves and resources report (the "Update Report") prepared by
Gaffney, Cline & Associates (Consultants) Pte Ltd ("GCA") in which GCA has
updated its assessment of resources for current expectations of Final
Investment Decision and production commencement delay. The Update Report
follows an earlier 1(st) July 2022 GCA reserves and resource report.

As approved by the Indonesian regulatory authority SKK Migas in 2022, a
two-phase development plan based on six initial development wells tied back to
a leased production platform at the Mako gas field is proposed, with sales gas
transported via the West Natuna Transport System ("WNTS") pipeline to
Singapore for sale to the Singapore market, and potentially to the Indonesian
domestic market via a yet-to-be constructed spur from the WNTS. Two further
development wells are planned 3 years after first gas. The development plan
proposes a plateau production of 120 MMscfd for 3.5 (Low case), 6.5 (Best
case), or 11.5 (High case) years.

Update Report

The revised estimates of gross (full field - 100%) recoverable dry gas to the
end of the PSC as of 31 December 2023 per the Update Report are:

 Gross Contingent Resource Estimates  Update              Change from

                                      Report              GCA Report

                                      (31(st) Dec 2023)   (1(st) Jul 2022)
 1C (Low Case) Bcf gas                227                 -8.8%
 2C (Best Case) Bcf gas               376                 -8.9%
 3C (High Case) Bcf gas               425                 -3.8%

 

Consequently, the net attributable to Empyrean 2C resources are reduced from
24 to 20.8 Bcf gas.

Revisions pertain to the revised FID timing and delay in Mako field production
startup until mid-2026.

The full field resources above are classified as contingent.

Gas volumes are expected to be upgraded to reserves once select commercial
milestones have been achieved, including execution of a Gas Sales Agreement
("GSA") and a Final Investment Decision.

Notes:

1.   Gross field Contingent Resources are 100% of the volumes estimated to
be recoverable from the Mako Field in the event that it is developed in
accordance with the approved plan of development.

 

2.   Net Contingent Resources represent Empyrean's actual net entitlement
under the terms of the PSC that governs the asset.

 

3.   The volumes presented in the table above are "unrisked" in the sense
that no adjustment has been made for the risk that the asset may not be
developed in the form envisaged.

 

4.   Last economic production year prior to the Duyung PSC expiry date for
1C, 2C and 3C is 2033, 2036 and 2036, respectively. Without considering the
Duyung PSC expiry date, 2C and 3C can be produced commercially up to 2037 and
2041 respectively.

 

 

The technical information contained in this announcement has been reviewed by
Empyrean's Executive Technical director, Gaz Bisht, who has over 32 years'
experience as a hydrocarbon geologist and geoscientist.

 

 

 

For further information please contact the following:

 

 Empyrean Energy plc
 Tom Kelly      Tel: +61 6146 5325

 Cavendish Securities plc (Nominated Advisor and Broker)
 Neil McDonald  Tel: +44 (0) 207 220 0500

 Pearl Kellie

 

 1  (#_ftnref1) Conrad Quarterly Activities Report for the Period Ending 30,
September 2023, issued 27 October 2023

 2  (#_ftnref2) Conrad Quarterly Activities Report for the Period Ending 30,
September 2023, issued 27 October 2023.

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