Dorado partner pursuing options to fund its share of project ahead of FID

Australia’s Carnarvon Energy is working to secure financing for the Santos-operated Dorado project located offshore Australia ahead of a Final Investment Decision (FID) for the project, which is expected later this year.

Discovered in 2018, the Santos-operated Dorado project is located in the Bedout Sub-basin, offshore Western Australia. Santos has an 80 per cent stake and its partner Carnarvon Energy has the remaining 20 per cent stake.

Santos launched the front-end engineering and design (FEED) phase for the Dorado project in late June 2021 and awarded the FEED contract for the Dorado FPSO to Altera Infrastructure last August.

Dorado is an integrated oil and gas project, which is planned to be developed in two phases. The first phase of the Dorado development involves the production of oil and condensate through a wellhead platform (WHP) to an FPSO. The vessel is the project’s largest component, comprising engineering, procurement of equipment, bulk materials and services, construction, installation, commissioning and testing of the facility.

In a statement on Friday, Carnarvon provided an update on the progress of the FEED work for the Dorado project and related project financing.

According to the company, detailed design and engineering work for the production facilities for the Dorado Phase 1 liquids development continues to progress as expected. The facilities engineering and subsurface studies have confirmed the project will initially produce 75,000 – 100,000 barrels of oil per day (bopd) (gross).

As explained by Carnarvon, the Dorado liquids are an extra light, sweet product with externally provided market analysis indicating sales are likely to achieve a premium to Brent.

Studies have also confirmed that the associated gas can effectively be re-injected into the Dorado reservoirs to maintain reservoir pressure, thereby maintaining strong production rates. This gas will be available for production as part of a subsequent, Phase 2, development, and has been incorporated in the basis of design for the facilities.

Detailed design for the production and injection wells has been completed, with tenders issued for long-lead items required for the development.

The final capital cost definition is being undertaken as part of the FEED process and will be finalised ahead of the FID. Given the Dorado project is in shallow water, near existing infrastructure and is an industry-standard design, initial operating cost estimates have confirmed that this project will be a low unit cost operation, Carnarvon said.

Furthermore, applications for regulatory approvals have been submitted to the relevant regulators for assessment, with the Production License expected to be granted ahead of FID. Based on the status of these activities, it is anticipated that the Dorado project will be FID ready by mid-2022.

Carnarvon has started a formal process to fund its share of the Dorado project. Azure Capital, appointed as Carnarvon’s financial adviser, is currently progressing a range of potential sources of capital.

These may include traditional reserve-based, non-recourse senior debt facilities; alternative funding options (including junior or subordinated debt, offtake prepayment and royalties); and, divestment of a portion of Carnarvon’s share of the Dorado project and associated exploration acreage.

Carnarvon will consider all funding options to deliver the optimal balance of capital management.

Carnarvon Managing Director and CEO, Adrian Cook, said: “We are pleased that the engineering and design work on the world-class Dorado Phase 1 liquids development is progressing to plan and on track to be ready for FID around the middle of this year. Various sources of capital are being pursued to optimise the company’s balance sheet and extract the most value from this high-quality asset.”

Meanwhile, Santos and Carnarvon have already started drilling operations on the first of two exploration wells located near the Dorado field, the Pavo-1 well, with the second well, Apus-1, scheduled to be drilled immediately after. The latest update related to the Pavo-1 well revealed that the well had had to be secured and the Noble Tom Prosser rig down-manned due to potential cyclone activity.