GSS Energy strikes oil, to start production next year
GSS Energy, a precision engineering firm newly venturing into oil exploration, has struck oil and gas in the Trembul field in Indonesia.
The group hopes, through its subsidiary, to produce some 200 barrels of oil per day (bpd) by the third quarter of next year, and to start gas production by the fourth quarter of 2018.
GSS announced on Wednesday that it has completed the first phase of drilling on its first well SGT-01 in the Trembul operating area in Central Java. "We were originally focused on oil, but to our surprise we also discovered gas," its chief executive officer Sydney Yeung told The Business Times in an interview.
Pertamina had in November last year given PT Sarana GSS Trembul (PT SGT) - a 49:51 joint venture between GSS and a commercial vehicle by the Central Java provincial government, PT Sarana Pembangunan Jawa Tengah - an award to produce oil and gas from Trembul for 15 years.
The area, which is 47.6 sq km in size, is estimated to have about 24.3 million barrels of contingent resources up to 800 metres, according to an independent report in 2015. No estimate has been done beyond 800 metres.
In the drilling of the first well, the group has reached a total depth of 1,255 metres and found eight layers of hydrocarbon-bearing sandstone reservoirs. Two of them are gas zones, which contain 1P recoverable reserve of 8.49 billion cubic feet of sweet gas. The six oil zones contain 1P recoverable reserve of 2.83 million barrels, according to preliminary in-house estimates.
Indonesian state-owned oil and gas company Pertamina, which owns the oilfield, has allowed GSS Energy to start monetising two of these, at depths of 863-869 metres and 910-915 metres respectively.
The discovery of oil and gas in this well has also led the firm to re-evaluate existing data for another well, called P1, that is one kilometre away,
The well, previously drilled by Pertamina in 2005, was plugged and abandoned earlier because of "data misinterpretation", GSS's Indonesian general manager Bambang Mulyadi said at the interview. The group is now in the process of entering the P1 well, and expects this to produce at least 100 bpd in the first quarter.
Besides this, GSS Energy is also working to modernise decades-old wells previously drilled by the Dutch. Out of the 24 old wells, it has identified three to four wells that are still in good condition, and plans to start production from two of them next year.
The first, TRB-03, should produce 70 bpd by the second quarter of next year. The second, TRB-06, will produce 30 bpd by the third quarter. These wells have a record of delivering up to 640 bpd in the past, said GSS Energy.
Hence, in all, the group will probably be producing 200 bpd of crude oil a day by the third quarter of 2018, said Mr Yeung.
By the fourth quarter, GSS Energy also expects to be able to monetise the gas output from SGT-01, which would provide a huge boost to its total oil and gas production.
"So far Pertamina has been extremely happy with us," said Mr Yeung. "I think we're the fastest company to have gone from award to drilling, and very soon to production."
GSS Energy may choose to accelerate its drilling programme to work on more old wells, he added, noting that since these were shallow wells the capital expenditure requirements were lower.
For now, it has planned a capital expenditure budget of US$5.1 million for next year. If the firm were to conduct seismic surveys - mandatory if it were to update its resources and reserve base - that would require another US$2.5 million.
But the group also hopes to pump oil and gas revenue back into production, making it a self-funding project, said Mr Yeung.
Shares in GSS Energy last traded at 15.6 Singapore cents. Trading in the counter was halted on Tuesday morning, pending this announcement. The shares will resume trading on Thursday morning.
Ronald K - Market Psychologist - A Stock Market Opportunist
