Conrad Asia Energy Ltd (ASX: CRD) (“Conrad”), an ASX-listed Asia-focused natural gas exploration and
development company, is pleased to provide an overview of activities for
the quarter ending 31 December 2023.
- Considerable progress has been made in maturing the Mako project during the past months. The key developments
include:
- Front end engineering design (“FEED”) studies for the Mako development project have concluded. Based on these
studies (and the procurement process to date), capital costs for Phase 1 are currently estimated to be US$325
million1 based on a 100% participating interest, in line with market trends. Capital expenditures to initial
revenues are currently estimated to be US$250 million1 (100%). Project costs and expenditure scheduling are
being further optimised to reduce this amount. The planned development wells are targeted to deliver 120 mmscfd (100%) for a plateau period of seven years.
- In Q3 2023, the Company signed a non-binding term sheet (the “Term Sheet”) with Sembcorp Gas Pte Ltd
(“Sembcorp”), a major Singapore energy company, which outlines the core terms and serves as the basis for
negotiating a definitive Gas Sales Agreement (“GSA”). Subsequent commercial negotiation between the Minister
of Mining and Natural Resources and Sembcorp has resulted in both improved price formula and a delay in
executing the GSA, and accordingly, Conrad has agreed with Sembcorp to delay the deadline to finalise a binding
GSA (which will be subject to customary conditions precedent) by the end of Q2 2024.
- During the quarter, Conrad progressed the technical and commercial work with the West Natuna Transportation
System (“WNTS”) Joint Venture and with the support of SKK Migas to negotiate the commercial and legal terms
of access to the WNTS for the transportation of the Mako gas to Singapore. Despite the good progress, delays
have been encountered and this has required a revision of the project timeline and finalisation of the GSA.
- While the Company continues to strive to reach a Mako final investment decision (“FID”) at the earliest, on the current trajectory of conclusion of the GSA and gas transportation agreement, FID would be delayed until mid-2024.
Production start-up would commensurately slip until mid-2026.
- The Duyung farm down process is progressing. With the announcement of the Term Sheet, as well as progress on all other facets of the project, more parties have expressed interest in the Mako project. The Company is engaging in
confidential discussions with potential partners regarding acquisition of a Participating Interest in the Duyung PSC.
- Conrad has appointed a financial advisor to assist with the debt funding portion of its share of the Mako project capital cost. Conrad has received an indicative term-sheet from one of the potential lenders to help fund Conrad’s share of project costs. Lender selection and completion of documentation are expected by mid-2024.
- In the Aceh Production Sharing Contracts ("PSCs"), Conrad has continued to evaluate options for commercialisation
of shallow-water gas discoveries with gross (100%) 2C Contingent Resource of 214 Bcf of sales gas (161 Bcf net
attributable to Conrad) in three of the four discovered gas accumulations. An update to the market is expected in the coming weeks. The Competent Persons Reports (“CPRs”)3 ascribed a net present value (“NPV”) of US$88 million net
attributable to Conrad to the Aceh PSCs.
- Prospective Resources in the Aceh PSCs are in excess of 15 trillion cubic feet (“Tcf”) of recoverable gas (P50, 100%) of which c 11 Tcf (P50) are net attributable4 to Conrad. Seismic studies revealed the presence of direct hydrocarbon
indicators (“DHIs”) including gas chimneys at many of the leads. The Company has been approached by potential
partners seeking material gas exploration opportunities. Recent multi-Tcf gas discoveries made elsewhere in offshore
Aceh have highlighted the potential of this region.
Conrad Managing Director and Chief Executive Officer, Miltos Xynogalas, commented:
Conrad has made solid progress with the Mako development project in the fourth quarter despite the delay in FID caused by extended negotiations with the WNTS stakeholders. The completion of the FEED studies and the progression of the environmental impact assessment (AMDAL) are significant milestones. The target of the end of Q2 2024 to finalise the GSA is a clearly defined target shared by all parties. The time taken to conclude negotiations has allowed an agreement in principle of improved price terms and has provided an opportunity to further optimise the amount and phasing of Phase 1 capital expenditures, significantly reducing cash required through initial gas production.
The response of potential debt finance providers and potential farminees is encouraging, and we have seen increased interest in the region to fund gas developments. We remain confident that when all commercial aspects of the project have been concluded, Conrad will be in a position to take FID. The optimised capital expenditures (via a staged production start-up) into an expected higher gas pricing regime delivers robust project economics. The extended timeline also allows more time for the company to advance current negotiations and to engage with other potential farm-in partners. Our goal is to continue to maximise economic returns to shareholders.
Significant progress has also been made in Conrad’s Aceh project area with the resource certification of existing discoveries3 that are currently being evaluated for commerciality, as well as our announcement3 of the size of the prospective resources (15 Tcf gross 100%). During the coming weeks, Conrad will seek to progress the potential market outlets for the existing flow-tested shallow water discoveries with the aim of maturing this into another significant gas project for Conrad. Commercialisation of the shallow water discoveries will increase Conrad’s 2C contingent resources by 75%.
We have seen offshore Aceh increasingly becoming an area of greater exploration focus, with major discoveries of multi-Tcf potential being announced late in 2023. Conrad has approximately 20,000 sq km acreage in offshore Aceh and is well positioned to participate in the development of its existing shallow water discoveries and pursue the deeper water high impact exploration where large structures have already been delineated.