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## cue - indonesia update (madura - jeruk/oyong) #

  1. 2,257 Posts.
    INDONESIAN INTERESTS
    Sampang PSC - Madura Strait, East Java, Indonesia (15% Interest)
    Operator: Santos

    Cue holds a 15% interest in the offshore Sampang Production Sharing Contract. The Sampang block is very close to Surabaya, Indonesia's second largest city which is a substantial market for natural gas. Energy demand in the area is expected to grow substantially.

    Cue was an original participant in the Sampang PSC which was signed on 4 December 1997. In 1998, 564 kilometres of infill 2D seismic was acquired over several structures.
    Drilling began in October 2000 and resulted in mid 2001 in the discovery of the Oyong oil and gas field in the central portion of the block, in approximately 42 metres of water.

    The first well of the drilling programme, Anggur-1, experienced an uncontrolled flow of gas while drilling at 585 meters. The gas subsequently caught fire. Personnel were safely evacuated from the drilling rig without injury. The fire was extinguished and the well plugged and abandoned, however, the jack up rig was extensively damaged.

    A second well, Anggur Utara-1, was drilled 1.25 kilometres to the north of Anggur-1 using a replacement rig. The well was designed to test shallow gas zones, one of which blew out in Anggur-1. No significant hydrocarbons were encountered.

    A third well, Anggur-2 was then drilled as a replacement for Anggur-1. The well experienced an uncontrolled flow at shallow depth and the rig was moved away from the well without damage or injury and subsequently moved to drill Oyong-1, approximately 40 kilometres to the east.

    Oyong-1 encountered a 110 metre gas column underlain by a 35-40 metre oil column in carbonate grainstone of the Pliocene age Mundu Formation. The top of the hydrocarbon column was encountered at 813 metres drill depth. The well was unable to reach its planned total depth of 2280 metres due to considerable mechanical difficulties resulting from high formation pressures near it final total depth. Oyong-1 was suspended after reaching a total depth of 1068 metres and the rig was moved 125 metres to the north to drill the Oyong-2 appraisal well.

    Oyong-2 confirmed the gas and oil columns seen in Oyong-1 in the Mundu Formation, the top of which came in approximately 33 metres high to prediction. After considerable mechanical difficulty, the well reached a total depth of 1935 metres against a planned total depth of 2280 metres. The deeper Wonocolo and Ngrayong objectives were penetrated high to prediction. A 2 metre zone with oil shows but of poor reservoir quality was encountered between 1833-1835 metres.

    Oyong-2 was suspended for potential future production and the Oyong-1 gas and oil zones were flow tested. The well flowed 1132 barrels of 41.9° API oil per day with 2.5 million cubic feet of associated gas per day through a 28/64 inch choke with a flowing tubing head pressure of 999 psi, from the 4 metre interval 927-931 metres.

    The test of the gas zone flowed 12.4 million cubic feet of gas per day through a 48/64 inch choke with a flowing tubing head pressure of 1005 psi, from an 18 metre interval 855-873 metres. Oyong-1 was suspended for potential future production.

    The drilling rig was moved from Oyong to Anggur-3, 1.2 kilometres east of Anggur-1. The well was designed to test the Mundu, Wonocolo and Ngrayong objectives that were not reached in the earlier wells. Anggur-3 encountered minor gas and oil shows in limestones in the Mundu and Wonocolo objectives, but was unable to reach the deeper Ngrayong objective due to mechanical difficulties

    After drilling Anggur-3 the drilling rig moved back to the Oyong field to drill the Oyong-3 appraisal well approximately 2 km east of the discovery well. Oyong-3 encountered a 19 metre column of oil in the Mundu formation. The oil column was penetrated approximately 20 metres below the gas/oil contact seen in the Oyong-1 and -2 wells. Wireline logs and pressure information have indicated an oil/water contact the same as that encountered in Oyong-1 and -2, indicating a gross oil column in the Oyong structure of approximately 38 metres.

    A 74km2 three dimensional seismic survey was acquired over the field in January 2002. The survey data has been used to revise the structural mapping and to predict reservoir distribution.

    Oyong Field

    The Oyong field was discovered in mid 2001 and has been delineated by a total of three wells.

    The oil and gas discovery is in 45 metres of water approximately 8 kilometres south of Madura Island and has a gas column of approximately 120 metres, underlain by a 38 metre oil column.

    On July 19, 2003 a Gas Sales Agreement was signed with PT Indonesia Power for the entire gas reserves of the Oyong field. The sale is denominated in US dollars..

    Reserves

    Field reserves have been audited by DeGolyer and MacNaughton, an international expert.

    The DeGolyer and MacNaughton reserves are:

    Proven (1P)
    Proven + Probable

    (2P)
    Proven + Probable

    + Possible (3P)

    Oil

    Oil in Place
    80
    99
    131

    Recoverable

    6.4

    9.9

    15.7

    Gas (including solution gas)

    Gas in place
    143
    169
    183

    Recoverable
    107
    135
    147

    The recoverable gas volumes do not allow for fuel and flare volumes.

    Oyong Development

    As a result of high crude oil prices, the joint venture has modified the approved Oyong development plan to bring forward first oil production to around year end 2005.

    The development consists of a simple well head structure formed by triangular braced surface well conductors which will extend above the sea surface from a sea floor tall template structure. Up to seven development wells are being drilled through and between the conductors; two gas wells and five horizontal oil wells.

    Oil and gas will be processed on a nearby moored barge. Oil will be exported by tanker and gas will be sent by pipeline to the P.T. Indonesia electricity generating station at Grati, East Java.

    The gas phase of the development has begun with first gas is expected around mid 2006. Solution gas associated with the early oil production will be reinjected until gas production begins to Grati.

    Oyong Funding

    The plan of development requires US$112 gross capital expenditure with Cue's 15% share being US$17 million.

    In December 2004, Cue made a placement of 40 million shares at an issue price of Australian 25 cents to raise AUD10 million.

    The money will be used to fund Cue's share of the initial capital expenditure for the oil development phase of the field.

    Recent Exploration

    The Sampang PSC also contains a number of attractive undrilled prospects, Addition infill 2D seismic was acquired over a number of prospects in 2002 and early 2003. An extensive 3D seismic survey was undertaken over the eastern and western portions in early 2005.

    The Mangga -1 well was drilled in October 2003 and encountered a 12 metre gas zone in good quality reservoir rock at the top of the Mundu Formation.

    After reaching a depth of 1633 metres unsuccessful attempts were made to evaluate several hydrocarbon shows beneath the top Mundu gas column.

    Further evaluation of the well was then conducted on a sole risk basis. Cue and Santos Limited declined to join the sole risk.

    Following obtaining pressure data and samples using a drill pipe conveyed tool and confirming the top Mundu gas zone, the well was deepened to 1663 metres. A production test of the zone from 1560 metres to 1663 metres recovered 33o API oil at a small non commercial rate.

    The Jeruk -1 well began drilling on 21 November 2003. Jeruk -1 is located 35km WSW of the Oyong field and 40km SE of Surabaya and was drilled by Santos Ltd on a sole risk basis. Cue did not participate in the well.

    On 8 April 2004, Santos Ltd announced that the well reach a total depth of 5,027 metres. Lost drill pipe in the hole prevented the well being drilled and evaluated to the planned total depth of 5,250 metres. An open-hole drill stem test of the Kujung carbonate objective section flowed oil and water emulsion (up to 80% water) at the rate of 4,700 barrels per day, 0.3 million cubic feet of gas per day and 470 barrels of water per day.

    Jeruk -2 began drilling on 22 July 2004. The well is located approximately 1.6 km east of Jeruk -1 and was programmed to a total depth of 5300 metres to evaluate the carbonate objective tested by Jeruk -1. Cue declined to participate in Jeruk -2.

    Santos announced that an open-hole Drill Stem Test (DST) was performed in the well during 16th and 17th of October 2004. The test was performed over an 18 metre interval from 5,134m to 5,152m measured depth (MD).

    The results from the DST were:

    * A flow rate of 7,488 barrels oil (1,190 kilolitres) per day was recorded through a 1/2 inch (12.7 millimetre) surface choke accompanied by 2.21 million cubic feet (62.6 thousand cubic metres) per day of gas during a 51/2 hour flow period.

    * The flow rate was constrained by the throughput capacity of the surface production test facilities.

    * A flowing tubing head pressure of 2,762 pounds per square inch (19,043 kilopascals) was recorded.

    The well was then deepened to 5507m MD where an unsuccessful effort was made to obtain wireline pressure data. The well was further deepened to 5674 metres MD in an attempt to establish the extent of the hydrocarbon column. After running a 4.5 inch liner, the well was drilled to 5726 metres MD and an open hole test run, which recovered 57 barrels of formation water, but did not provide pressure data of sufficient quality to determine the extent of the hydrocarbon column.

    Due to mechanical difficulties the well was side tracked to 5460 metres MD and an open hole test run below a 4.5 inch liner set at 5430 metres.

    Oil and gas were recovered at surface during the clean up flow, but the flow potential could not be established due to mechanical restriction caused by well debris in the test string.

    On 20 January 2005, Santos advised that testing operations conducted by its wholly owned subsidiary, Santos (Sampang) Pty Ltd, had been completed on the Jeruk 2 wellbore and that the well would now be suspended for re-entry at a later date.

    Santos Quote

    "This decision followed analysis of data from the open-hole Drill Stem Test (DST) 3 conducted during the prior week and mechanical well bore difficulties.

    Examination of data obtained during the test confirmed that a mixture of fluids containing oil flowed to the surface during the initial flow from DST 3. The fluid mixture flowed at an unstabilized rate as part of the initial "clean-up" flow. The oil has an estimated gravity of 33o API, the same as oil recovered from earlier DSTs in the Jeruk field.

    The open-hole DST 3 commenced on 9 January 2005 and was performed over a 30 metre interval from 5,430m to 5,460m measured depth. During the initial part of the DST the test tools became plugged with well debris, preventing further flow.

    A stable flow rate could not be established. Several attempts were made to clear the plugged test string. However, it became impractical to continue testing opera`tions and the well was suspended.

    The results from DST 3 indicate that oil is present in the Jeruk field down to at least 5,460m measured depth. Analysis of data following completion of the test indicates that the oil tested in Jeruk 2 DST 3 is part of the same hydrocarbon column as that tested in Jeruk 2 DST 1 over the interval 5,134m to 5,152m in the Jeruk 2/ST2 (Side Track) well bore.

    A hydrocarbon column of at least 379m has therefore been encountered in the Jeruk field indicating likely recoverable reserves in excess of the pre-drill estimate of 170 million barrels."

    End Quote

    In April 2005, following a proposal by Santos to side track the Jeruk -2 well and to drill a further four Jeruk appraisal wells, Cue reinstated its full 15% rights in the Jeruk discovery. Cue was required to pay approximately A$11 million cash, which was the cost that Cue would have occurred if it had originally participated in Jeruk -1 and -2. In addition Cue is required to pay a sole risk premium out of production from Jeruk.

    In May 2005, Jeruk -2, ST 4 (side track 4) began drilling. The carbonate reservoir was penetrated at 5020 metres MD after setting a 9 5/8 " liner to 4974 metres MD. The well was drilled to 5100 metres MD where a bare foot drill stem flow test was run. The initial flow recorded a mixture of oil and drilling fluids before the packer failed. A 7 inch line was then run from 4859 to 5088 metres MD.

    Core 1 was cut from 5105 to 5123 metres MD with 16.7 metres recovered. Core 2 was cut from 5123 to 5134 metres with 8.3 metres recovered.

    A further drill stem flow test was conducted over the open hole interval from 5088 to 5230 metres MD (4764 to 4901 TVD). The test flowed a mixture of oil and water at a combined rate of up to 1300 barrels per day. On 12 August 2005, preparations were being made to conduct a cased hole drill stem flow test through the 7 inch liner.

    Future Exploration

    Exploration drilling is expected to continue in the block with an additional exploration well in late 2005 or early 2006.

    copyright 1999 Cue Energy

    wrxsti
 
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