Hong Kong (TheInsiderStories)－CITIC Resources Holdings Limited (HKEx: 1205) announced that the application to renew the Seram Island Non-Bula Block (Seram Block) Production Sharing Contract (PSC) held by CITIC Seram Energy Ltd., an indirect wholly-owned subsidiary of the company, has been approved by the Indonesian government.
Witnessed by the Deputy Minister of the Ministry of Energy and Mineral Resources Arcandra Tahar, Suo Zhengang, vice chairman and chief executive officer of CITIC, together with other PSC participants, officially signed the new PSC with the Indonesian government on May, 31.
The existing PSC will expire in October 2019 and renew existing rights to explore, develop and produce oil for an additional 20 years until October 2039. CITIC Seram Energy remains the operator of the Seram Block and the company will hold a 4 percent interest in the new PSC.
The Company made a material gas discovery in the Lofin Structure located in the Seram Block in 2015. As of August, 31, 2015, the amounts of contingent reserves and contingent resources of recoverable gas and condensate in the Lofin Structure are estimated at 2,020 billion cubic feet (Bcf) and 18.25 million barrels (MMbbls), respectively (100 percent basis), representing a total of 354.9 MMbbls barrels of oil equivalent (100 percent basis).
Potential and extant carbonate reserves in the carbonate structure, where the Lofin is located, reflect the overall growth potential of the Seram Block. To better extract the true commercial value of natural gas resources, the company has begun the process of renewing the PSC since 2016.
Against the background of the Gross Split PSC for the oil and gas industry issued by the Indonesian government, CITIC has successfully renewed the PSC with favorable terms after more than two years of efforts, ramping up the overall value of the PSC.
The Seram Non-Bula Block is located on Seram Island with he total area is about 1,524 square kilometers. The principal field in the Seram Block is the Oseil Field. The field is located inland from the northeast coast of the island. As at Dec. 31, 2017, the Seram Block had estimated proved oil reserves of 1.1 million barrels.
Discovery of the Oseil Field occurred in 1993. Since that time, nine additional wells, both vertical and horizontal, have been drilled to develop the field and have identified oil-bearing Manusela accumulations in four separate closures.
Currently, oil has been produced from three of the four fault block closures. In the period from 1988 to 2002, the operator has drilled four exploration wells in the Seram Block, resulting in commercial oil discovery in the Oseil Field.
On Nov. 23, 2006, CITIC Seram completed the acquisition of a 51 percent participating interest from KUFPEC. As of the same date, CITIC Seram became the operator responsible for the day to day petroleum operations at the Seram Block.
As the operator of the oil block, CITIC Seram is expected to maintain and improve current production levels at the Oseil Field on an economic and efficient basis in order to maximize output at the Oseil Field.
In 2012, Lofin-1 exploration well was drilled to explore the oil and gas potential. In Oct. 2014, CITIC Seram commenced drilling of Lofin-2 appraisal well.
CITIC Seram entered into an agreement on Feb. 7, 2018, to sell all of its rights, interests and obligations in respect of a 10 percent interest in the PSC to an independent third party. CITIC Seram will retain a 41 percent participating interest in the PSC.
CITIC Resources has been listed on the Hong Kong Stock Exchange since 1997. Principal activities of the Company include the exploration, development and production of oil and coal, investments in manganese, bauxite mining, alumina refining and aluminium smelting, as well as the import and export of commodities.
CITIC Limited is the largest shareholder with about a 60 percent interest in the company.